Refined slippage: variance reduction using counterfactual returns
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A new metric is introduced that benchmarks fill prices against counterfactual prices, rather than the arrival price
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Slippage is often used to judge the quality of execution of an order as well as to calibrate trading strategies to minimise expected slippage. Stuart Baumann introduces a new metric for slippage, referred to as ‘refined slippage’. Refined slippage has the same expectation as classical slippage. However, it has much lower variance, and hence can measure market impact
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