Accounting

This page documents the accounting approach used by the simulation engine.

Daily Position Stats Accounting

On a daily basis, engine computes an end-of-day overview of each asset held within a portfolio , as long as closing price on date(t) is available.

Close Quantity

Quantity of asset at market close.

• (+ve) LONG

• (-ve) SHORT

Value (USD)

By Default:

Value = Quantity * Price(t)

Unrealized Pnl

Unrealized Pnl (t) = Position Value(t) - Average Cost Basis (t) * Quantity

Portfolio Weight

Weight = Position Value(t) / Total Value(t)

Note:

• Total Value (t) is Portfolio Value at date (t) with closing price (t)

Tax Lot Accounting

This simulated taxable gains/loss for the portfolio, similar to how most brokerages handle transactions. Each new accumulating position will create a new Tax Lot entry. Engine uses FIFO tax lot selection where oldest purchases are liquidated first.

Each Tax Lot keeps track of:

• Total Realized Pnl

• Cost basis per unit

Example:

Position with 3 lots:

Lot 1: +100 qty @ $50 (purchased Jan 1)
Lot 2: +100 qty @ $60 (purchased Feb 1) 
Lot 3: +100 @ $40 (purchased Mar 1)
 
Sell 150 shares at $55:
FIFO sells Lot 1 (100 shares) + 50 shares from Lot 2

Total Realized Pnl

Realized PnL (Profit and Loss) is the actual profit/loss that an investment makes upon liquidation.

For tax lot, a:
Realized Pnl = (Exit Price - Cost Basis Per Unit) * Redeem Quantity

Cost Unit Per Unit