What you will learn
- Bid and ask
- Limit-order uncertainty
- Partial fills
- Stops and gaps
Bid and ask
A buy market order interacts with ask-side liquidity and a sell with bid-side liquidity under the modeled venue. Midpoint execution is a separate assumption that may be unrealistic. Include quantity and price-level depth where the data supports it.
Limit-order uncertainty
Limit fills require assumptions about queue position and available opposing flow. A touched price alone is insufficient evidence. Report conservative and alternative models when queue information is missing rather than claiming exact fills.
Partial fills
Partial fills change both position and remaining order quantity. Each execution must update accounting once. A model that treats every partial fill as the full requested size can create impossible exposure.
Stops and gaps
Stops and gaps require explicit trigger and execution conventions. A stop activation does not guarantee the stop price. Ambiguous OHLC paths should be flagged or handled under a predefined rule, not resolved favorably after seeing P&L.
Worked example
A limit order requests five units but available modeled quantity is two. Filling all five at the best price assumes liquidity beyond the modeled evidence. The remaining three need an explicit subsequent path.
Try it yourself
Define the resulting order and position state after the two-unit fill, then describe two possible later events.
Show the worked solution
The position increases by two and remaining order quantity becomes three. Later opposing flow may fill more, or a confirmed cancellation may remove the remainder. Neither event should be assumed without applying its rules.
Apply this to your course project
Implement or specify a simulator and demonstrate its behavior on adversarial price paths.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.