Is “Arrival price” same as “Benchmark Price” for Implementation Shortfall?
this confuses me to no end when i dont really concentrate…do i have this right? arrival price is the same as decision price, which can be the same as benchmark price, but sometimes differs when you have a multi period horizon with new daily decision prices, but still the original benchmark price for measuring missed opportunity costs: for realized profit/loss and delay costs, the benchmark price is generally the previous days close when the orders are implemented over multiple days whereas the missed trade opportunity is always going to be the difference between the original benchmark/decision price and trade cancellation price
So: arrival price = decision price = benchmark price = paper portfolio price = price when you pulled the trigger to trade. Right?
if all choices happen over the course of one trading session then i believe this would be true
jbaphna Wrote: ------------------------------------------------------- > So: > > arrival price = decision price = benchmark price = > paper portfolio price = price when you pulled the > trigger to trade. > > Right? Yes. Four prices you need to know. 1.) Benchmark or Arrival Price 2.) Order changed price or Previous Day Close depending on answer 3.) Execution Price 4.) Order Canceled Price (Order Changed - Benchmark) / Benchmark (Shares Purchased / Shares Ordered) Delay Costs (Execution - Order Changed) / Benchmark (Shares Purchased / Shares Ordered) Realized Profit and Loss (Order Canceled - Benchmark) / Benchmark (Shares Unpurchased / Shares Ordered) (Explicit Costs / Paper Portfolio Investment) Obviously has to equal Paper (Portfolio Gain - Actual Portfolio Gain) / Paper Portfolio Investment.
got it got it, thanks!
Not to confuse anyone:D Implementation shortfall strategy (or arrival price strategy) A strategy that attempts to minimize trading costs as measured by the implementation shortfall method. (p. G-9).