TWAP Execution Simulation - Quant Researcher Interview Question
Difficulty: Medium
Category: market_microstructure
Asked at: BofA, HRT, Citadel, Two Sigma, Tower Research, JPMorgan, Goldman Sachs
Topics: algorithmic_trading, simulation, execution_algorithms
Problem Description
Time-Weighted Average Price (TWAP) is a fundamental algorithmic execution strategy designed to minimize market impact by distributing a large order evenly over a specified time horizon. In realistic market microstructure simulations, execution algorithms must adhere to volume participation limits to avoid signaling intent or exhausting available liquidity in thin markets. This problem models a constrained execution strategy where fill rates are bounded by a percentage of realized market volume.
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