Overview

A target position needs both an economic justification and an execution plan. A forecast worth ten basis points does not support unlimited turnover, and a favourable average fill price does not demonstrate success if most of the target remains unfilled. This topic converts liquidity measurements into a cost budget, assigns the parent quantity across time and reconciles the result against the intended position.

By the end of this note you should be able to:

• compare gross expected benefit with an explicit cost model;
• distinguish marginal capacity from average profitability;
• construct TWAP, predicted-volume VWAP and participation schedules;
• specify the child-order and residual-quantity policies omitted by a schedule alone;
• compute implementation shortfall with partial completion and fees;
• interpret the trade-off between waiting, impact and signal decay.

1. Contents
2. The big picture