# Realistic Market Impact Modeling for Reinforcement Learning Trading Environments

arXiv: https://arxiv.org/abs/2603.29086 · HTML: https://mlsanity.com/paper/2603.29086/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Placed in Adversarial robustness and RL in finance, one of 15 directions in Deep reinforcement learning methods.
- Builds on 8 of its 31 references that are in the map.
- First posted on arXiv 30 Mar 2026.

## Placed in

- Deep reinforcement learning methods / [Adversarial robustness and RL in finance](https://mlsanity.com/deeprl/adversarial-robustness-and-rl-in-finance/)

## Builds on (most cited first, 8 of 8)

- [Proximal Policy Optimization Algorithms](https://mlsanity.com/paper/1707.06347/) (2017)
- [Soft Actor-Critic: Off-Policy Maximum Entropy Deep Reinforcement Learning with a Stochastic Actor](https://mlsanity.com/paper/1801.01290/) (2018)
- [Continuous control with deep reinforcement learning](https://mlsanity.com/paper/1509.02971/) (2015)
- [Optuna: A Next-generation Hyperparameter Optimization Framework](https://mlsanity.com/paper/1907.10902/) (2019)
- [Addressing Function Approximation Error in Actor-Critic Methods](https://mlsanity.com/paper/1802.09477/) (2018)
- [Asynchronous Methods for Deep Reinforcement Learning](https://mlsanity.com/paper/1602.01783/) (2016)
- [OpenAI Gym](https://mlsanity.com/paper/1606.01540/) (2016)
- [Reinforcement Learning for Quantitative Trading](https://mlsanity.com/paper/2109.13851/) (2021)

## Built on by (most cited first, 1 of 1)

- [Agentic Trading: When LLM Agents Meet Financial Markets](https://mlsanity.com/paper/2605.19337/) (2026)

## Abstract (arXiv)

Reinforcement learning (RL) has shown promise for trading, yet most open-source backtesting environments assume negligible or fixed transaction costs, causing agents to learn trading behaviors that fail under realistic execution. We introduce three Gymnasium-compatible trading environments -- MACE (Market-Adjusted Cost Execution) stock trading, margin trading, and portfolio optimization -- that integrate nonlinear market impact models grounded in the Almgren-Chriss framework and the empirically validated square-root impact law. Each environment provides pluggable cost models, permanent impact tracking with exponential decay, and comprehensive trade-level logging. We evaluate five DRL algorithms (A2C, PPO, DDPG, SAC, TD3) on the NASDAQ-100, comparing a fixed 10 bps baseline against the AC model with Optuna-tuned hyperparameters. Our results show that (i) the cost model materially changes both absolute performance and the relative ranking of algorithms across all three environments; (ii) the AC model produces dramatically different trading behavior, e.g., daily costs dropping from 200k to 8k with turnover falling from 19% to 1%; (iii) hyperparameter optimization is essential for constraining pathological trading, with costs dropping up to 82%; and (iv) algorithm-cost model interactions are strongly environment-specific, e.g., DDPG's OOS Sharpe jumps from -2.1 to 0.3 under AC in margin trading while SAC's drops from -0.5 to -1.2. We release the full suite as an open-source extension to FinRL-Meta.