Implementation shortfall closing price

[sfad]

From the 2006 past paper
At 2pm trader receives an order to buy 100,000 shares at $15.
At 3.10 pm trader places order with broker to buy at price of $15.50
At 3.30pm broker executes 60,000 shares at $15.75.
Remaining order for 40,000 shares is cancelled by trader.
Stock closes that day at $16.00 on volume of 120,000 shares
Fifteen days later, the stock closes at $18.00
The missed trade/opportunity cost here is: ($18-$15) x 40,000.
Why do we use the closing price 15 days later instead of the $16 closing price?

 

[Grrreg]

Shouldn’t the missed trade opportunity cost be #cancelled shares * (cancellation decision price-decision price), so 40,000*(15.75-15) ? Anyway if we are asked to calculate an implementation shortfall without giving a date I think it is fair to use the last price fgiven so 18 in this case

 

[MrSmart]

Grrreg wrote:
Shouldn’t the missed trade opportunity cost be #cancelled shares * (cancellation decision price-decision price), so 40,000*(15.75-15) ? Anyway if we are asked to calculate an implementation shortfall without giving a date I think it is fair to use the last price fgiven so 18 in this case

Cancellation price was the closing price, given that the trader cancelled the trade on close.
The question is definetly wrong. The position has been closed long before the $18.
Edit: Nevermind, the trader issued the cancellation order, not the client.

 

[sfad]

Grrreg wrote:
Shouldn’t the missed trade opportunity cost be #cancelled shares * (cancellation decision price-decision price), so 40,000*(15.75-15) ? Anyway if we are asked to calculate an implementation shortfall without giving a date I think it is fair to use the last price fgiven so 18 in this case

But why do we use the last date given and not the previous day close?

 

[MrSmart]

sfad wrote:

Grrreg wrote:
Shouldn’t the missed trade opportunity cost be #cancelled shares * (cancellation decision price-decision price), so 40,000*(15.75-15) ? Anyway if we are asked to calculate an implementation shortfall without giving a date I think it is fair to use the last price fgiven so 18 in this case

But why do we use the last date given and not the previous day close?

The client did not cancel the trade, the trader did. For all we know, he is still expecting it to be filled.