CFA III SS 16 Reading 32 EOC Question 22

CFA Level III Portfolio Management
#1

Question asks for the “implicit transaction cost” of the trade using the VWAP as the price benchmark.

Gives the answer as

Cost = Shares x (executed price - VWAP)

This answer does not take into account the missed trade opportunity cost (3200 shares executed out of an initial order of 10,000).

Am I missing something? Are implicit “transaction” costs different than implicit costs?

Again, from the reading, implicit costs are:

  1. Bid Ask spread

  2. Market Impact

  3. MISSED TRADE OPPORTUNITY COSTS

  4. Delay Costs

Thanks in advance!

#2

In my point of view, implicit costs are:

realized profit and loss

slipplage/delay costs

opportunity cost (which include only part of the trade that is cancelled)

Thus, in the this question only realized P/L is concerned.

The guy bought 3200 @ 17,05 but his benchmark is 17, he realized a loss of 3200 * (17,05-17)

Slipplage is calculated with the part of the transaction that is traded later.