Implementation Shortfall

sorry can you sum up your question, i think i can answer it, but i haven’t been following your thread.

I think its an error. We comparing everything to paper investor. So denominator should have the same decision price

Why is it called “Realized Loss”? I could remember this if the name made sense. It’s more like “delay cost light”.

Because its your actual loss from not making the trade a day earlier, and a day earlier it your actual cost of delaying the trade by a day.

What if the trade is executed in the same day? Does that mean there is no delay cost? Or no Realized Loss?

I’m noticing that in every single CFAI example I’ve seen related to this topic, it’s always about $ amounts per share and not %.

cfa^3, Was your question why the denominator of the 2nd trade $9.99? It makes sense, since like you said they want you to break it out. if you think of it first as TOTAL costs then it’s 100*(.08) from $10.08-$10.00, but they want it broken out: Delay Costs = (close (t) - close (t-1) ) so in this case close (t) = $9.99 So Delay costs = $9.99 - $10.00 = -.01 Realized Costs = traded vs implementation costs it’s $9.99 b/c it’s a new day and they explicitly tell you that it’s $9.99 so $10.08-$9.99 = .09 add them together -.01 + .09 you get .08 …they just wanted you to break it out. so you were just confused as what is “implementation costs”. Well if they asked per minute then implementation costs would just be say the close of each minute.

sickel 2, if traded same day, then no, no delay costs. (given that they are functioning in a “daily” environment, meaning that’s their unit of measure)

jemsk8…i Kinda follow you… but… they use $10 in the Tuesday Denominator for Delay and they use $9.99 in the Tuesday Denominator for Realized Profit why the difference? shouldnt the denominator for both of these be the same seeing that they are both for Tuesday?

no, denominator should not be the same, b/c you’re measuring different things. 1) delay cost should be 10 bucks b/c that was monday - you are measuring the difference b/w now and monday…2) realized cost - is this idea of a “reset” benchmark if only i could draw it… monday tuesday ---------------|--------------- delay costs | realized cost (-.01) | (+.09) delay costs are like cost of not trading on monday, that’s why you used the $10 denominator realized is like tuesday’s costs, so you use $9.99 as denominator

cfacfacfa, 9.99 is an error I replied to your question on it in the other thread, follow my advice to use extreme numbers instead of $10.08 and $9.99 for that portion of the trade and you’ll see for yourself http://www.analystforum.com/phorums/read.php?13,744984,747990#msg-747990