Optimizing Broker Performance Evaluation through Intraday Modeling of Execution Cost

Minimizing execution costs for large orders is a fundamental challenge in finance. Firms often depend on brokers to manage their trades due to limited internal resources for optimizing trading strategies. This paper presents a methodology for evaluating the effectiveness of broker execution algorithms using trading data. We focus on two primary cost components: a linear cost that quantifies short-term execution quality and a quadratic cost associated with the price impact of trades. Using a mode...