# Implementation Shortfall Vol 6 Problem 11 b

If delay cost is calculated as

Shares purchased/Shares ordered x (Closing price - Benchmark price)

the closing price on Monday is 9.99, on Tuesday is 10.01 and benchmark price is 10, shouldnt the delay cost be

monday 9.99-10.00 and on Tuesday 10.01-10? The solution has

monday 10 - 10 and on Tuesday 9.99 - 10.

Any thoughts?

watch where you post these. you keep posting L3 specific questions in the Water Cooler.

sorry…did not realize that as I kept selecting the right SS. reposted it under Level 3

This is a slightly tough one because they don’t have an example like this in the bluebox orin the text where trades are done on two days .

I think of it as tying everything back towards the benchmark price:

Delay = Days_Close - Benchmark

Realized P&L = Trade_Price - Prev_Day_Close.

If you add these two components ( with a day lag between Realized P&L and Delay , the Prev_Day_Close in first is same as Days_Close in the second ).

Then you get the sum of the two terms ( equivalent to implicit costs minus missed trade )

= Trade_Price - Benchmark , which intuitively is the total P&L for these two terms . The only way you can make the math add up is if you treat the Prev_Day_Close in first same as Days_Close in second … And You must have two values for each of the two equations above for two trading dates.