A trader can report an excellent average fill price by completing only the easiest fraction of an order. Implementation shortfall evaluates the complete intended position, including the price consequence of shares never acquired or sold. This lesson derives a sign-consistent ledger from hypothetical and actual marked wealth, decomposes delay and execution concessions, and uses that ledger to compare execution schedules.
Learning objectives. By the end of this note you should be able to:
- compute shortfall for buys, sells and partial completion;
- derive the formula from a common terminal valuation;
- decompose delay, execution concession, opportunity cost and fees;
- distinguish exact attribution from causal impact;
- compare urgency policies using all outcome branches.
In this lesson
- Start from the position the decision intended
- A complete numerical ledger
- Delay and execution concession
- The evaluation horizon is a policy choice
- Urgency is an economic trade-off
- An implementation check
Before you start
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