Liquidity Hole Simulation - Quant Researcher Interview Question
Difficulty: Hard
Category: backtesting
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: backtesting, volatility, transaction_costs, risk_management
Problem Description
Liquidity holes occur when market volatility spikes, causing liquidity providers to widen bid-ask spreads to manage inventory risk. Simulating these dynamic transaction costs is crucial for realistic backtesting, as strategies that appear profitable in normal conditions may fail during stress regimes. This problem models the impact of volatility-dependent spreads on trading strategy performance.
Task
Implement a backtesting engine that calculates the total Profit and Loss (PnL) of a trading str
Practice this hard researcher interview question on MyntBit - the all-in-one quant learning platform with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.