CFA III SS 16 Reading 32 EOC Question 22

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


  4. Delay Costs

Thanks in advance!

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.