Quant Interview Practice Questions

Liquidity holes occur when market volatility spikes, causing liquidity providers to widen bid-ask spreads to manage inventory risk. Simulating these dynamic transaction costs is crucial for realistic backtesting, as strategies that appear profitable in normal conditions may fail during stress regimes. This problem models the impact of volatility-dependent spreads on trading strategy performance. Task Implement a backtesting engine that calculates the total Profit and Loss (PnL) of a trading str