Transaction Costs Portfolio Interview Guide
Transaction costs portfolio interview guide covering spread, commission, impact, slippage, turnover, capacity, and examples.
Candidates evaluating whether signals survive implementation costs.
Costs separate paper edge from real edge
Transaction costs include commissions, bid-ask spread, market impact, borrow, taxes, financing, and slippage from imperfect execution.
Costs interact with turnover
A strategy with modest expected return can be attractive at low turnover and unusable at high turnover. The same signal can scale differently by asset.
Concrete example
If a signal expects five basis points per trade but average round-trip cost is eight basis points, the gross signal is not enough.
Capacity matters
Larger trades can move markets more. Discuss volume, spread, participation rate, and whether costs grow nonlinearly with size.
Common mistakes
Candidates often report backtest performance before costs. A practical portfolio answer should move quickly from gross to net performance.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.