fintech-algorithms

Index Replication-Cost Estimator

Install and import

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/governance-and-maintenance/index-replication-cost-estimator";

Signature

calculate(data)

Worked example

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input

data
{
  "trades": [
    {
      "id": "A",
      "tradeValue": 12000000,
      "spreadBps": 6,
      "impactCoefficientBps": 18,
      "participation": 0.08
    },
    {
      "id": "B",
      "tradeValue": -7000000,
      "spreadBps": 10,
      "impactCoefficientBps": 25,
      "participation": 0.12
    },
    {
      "id": "C",
      "tradeValue": 3500000,
      "spreadBps": 14,
      "impactCoefficientBps": 30,
      "participation": 0.18
    }
  ]
}

Call

calculate(data)

Returns

object with 3 fields: results, estimatedCost, costBpsOnGrossTrade

{
  "results": [
    {
      "id": "A",
      "spreadCost": 3600,
      "impactCost": 6109.402589,
      "totalCost": 9709.402589
    },
    {
      "id": "B",
      "spreadCost": 3500,
      "impactCost": 6062.177826,
      "totalCost": 9562.177826
    },
    {
      "id": "C",
      "spreadCost": 2450,
      "impactCost": 4454.772721,
      "totalCost": 6904.772721
    }
  ],
  "estimatedCost": 28401.098007,
  "costBpsOnGrossTrade": 11.360439
}

Diagrams

Index Replication-Cost Estimator — article hero
Index Replication-Cost Estimator — failure guard
Index Replication-Cost Estimator — worked example

Calculation flow

Index Replication-Cost Estimator calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Index Replication-Cost Estimator"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Index Replication-Cost Estimator methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References