| Component | Formula | Value | Notes |
|---|
| Spread Cost | ½ × spread × % crossed | $3,460 | Half-spread × aggressive ratio |
| Temporary Impact | η × σ × √(Q/V) | $8,420 | Reverts after order completes |
| Permanent Impact | γ × σ × Q/V | $2,840 | Information leakage, leaks into price |
| Timing Risk | σ × √T / √2 | $11,240 | Adverse drift during execution |
| Opportunity Cost | Missed shares × move | $0 | Assumes full fill |
| Total IS | Sum above | $25,960 | vs decision price |
| As % of notional | IS / (Q × P) | 18.8 bps | Industry good = < 10 bps |
How to reduce IS: longer horizon = lower impact but higher timing risk. Aggressive crossing = fast but expensive. Almgren-Chriss optimal trajectory balances both. For 100k NVDA shares: ~1.5 hour TWAP is near-optimal. Anything > 5% of ADV warrants a desk call.