I had a lot of difficulty with this as well but I realized you just have to talk yourself through the trade. Memorizing formulas isn’t helpful b/c the difficulty of this analysis is identifying the relevent prices. Implementation Shortfall has 4 costs: explicit, realized, delay and mtoc (market timing opportunity cost). Explicit is easy, it’s the transaction cost OVER the entire order.
I first draw up a time line - this is key because the hadrest parts are identify the relevent “decision price” which is usually the prevous day closing price. So do yourself a favor and draw out a timeline. If it occurs say over 3 days, I’ll make 3 columns labeled Mon, Tues, Weds. Under each one, I write down in chronological order what happens.
For example:
Mon - identify where stock closes, closes at price A
Tues - the trader decides to put in a limit order at some price. Stock closes higher, order goes totally unfilled, closes at price B
Weds - order gets revised at new price, gets partially filled at that price. You pay commision, rest unfilled and stock closes at new price, closes at price C
First identify the easy things. For the 3 implicit costs, there are only 2 weights. The portion of the order filled (realized & delay) and unfilled (mtoc). Also, all 3 implicit costs share the same denominator, the first close price you observed before you deven decided to put in the trade, close price A.
Now you just need to figure out the numerators.
MTOC - what didn’t get done, so it’s where the stock ultimately closed, less the price you first saw it at (close price C - close price A).
Realized is what’s realized, (duh!), ie the executed price less the close price from the day before (close price B). Delay or slippage is the cost not being able to fill the original order (think the price to what it SLIPPED to). In that case, you put in the order Tues morning but it didnt get filled, it slipped to Tues’ closing price of Price B. And what do you subtract? The previous day close price, which in this case is price A.
Best of luck