The market impact formula ( Component of IS)

[jesswong]

For the Implementation shortfall , one of the component is market impact , according to the schweser the formula is (execution price - decision price / benchmark price )X no of share executed , I would like to know when use decision price and when use benchmark for calculation , The AM 2016 Q10 part d use decision price , but some example in schweser use benchmark price , I m so confused , plz help , thanks !

 

[olivia_x]

it depends on whether the trade completed after a gap (if make the order on Wednesday, decision price could be either given or the close price on Tuesday, but trade not completes until Friday, so the relative decision price or Thursday’s close price would be used here)

 

[betabeater]

we had a short discussion here: i included an example, hope it helps makes things a little bit more clear.
http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91351491