Anyone already did the topic test Placid Lake Case Scenario?
I have found a big inconsistency in how the IS is calculated in this topic test and in the CFA text book (on page 24).
The big difference is in the decision price DP and benchmark price BP.
All of the transactions occur on the same day so the DP = BP. The only time that you would have a BP price would be if the total execution period spans multiple trading periods.
My guess is that you’re trying to calculate this on a bps instead of on a per share basis (I did this for about 3hrs before deciding to try other methods…). Implementation shortfall on a per share basis is just:
Paper x - (Realx - Commissions) = .12 - .04 + .07 + .01. Notice that the losses become positive as they are accretive to overall costs.
x = ([Price Gain/Loss on trade * Shares Traded on trade] / shares in that trade).