A portfolio can earn money while its execution process wastes money, and an execution desk can beat VWAP while leaving the desired position largely unbuilt. Post-trade analysis separates these questions by reconstructing implementation shortfall, checking the records behind it and comparing actual costs with forecasts made before the trade. This lesson develops an auditable parent-order report and shows why a cost difference does not, by itself, identify a better execution algorithm.
Learning objectives. By the end of this note you should be able to:
- reconcile a parent order to unique fills, cash and terminal position;
- compute and interpret decision-, arrival- and VWAP-relative costs;
- aggregate shortfall using a declared weighting rule;
- measure conditional errors in a pretrade cost model;
- distinguish accounting attribution, prediction and causal evaluation.
In this lesson
- Reconstruct the trade before grading it
- An exact accounting example
- Three benchmarks, three questions
- Combine reports without changing the question
- Test the cost forecast on the conditions it claimed to cover
- Turn the review into a controlled change
Before you start
The full lesson, with worked examples and exercise solutions, is for members.
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