Questions / Quant trading, Execution & microstructure
Implementation shortfall
You decide to buy 1,000 shares when the benchmark price is 20.00. All shares execute at an average of 20.04, with total fees of 10. What is implementation shortfall relative to buying all at the benchmark?
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Answer: 50 currency units
- Price cost is 1,000 × 0.04 = 40; add fees of 10 for total shortfall 50.
Interview shortcut. Shortfall = price slippage × shares + fees.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.