Quant development: Any good ideas to simulate market impact? Market simulators?
I wanna do backtesting with historical ECN market data. The complexity is that when backtesting with the data from past, the algorithm wasn’t actually there, and thus its actions will not have an impact on the historical data. The easiest way is to remember all cumulative changes to the historical data. If it is NYSE/AMEX open book, this way may not work well. Do you have any good ideas to enable more realistic impact simulation?
You can have a look at the Penn-Lehman Exchange simulator:http://www.cis.upenn.edu/~mkearns/projects/plat.html
A bit old now but still interesting.
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