Markets: A Rigorous Course

M05 · Problem 12 ★ Check

VWAP and implementation shortfall

(a) Prints in a 15-minute window: 2,000 shares at ₹500.20, 5,000 at ₹500.60, 3,000 at ₹501.00. Compute the VWAP. A trader who bought 20% of each print: what is her average price? (b) A fund decides to buy 1 lakh shares when the mid is ₹500.00. Execution starts when the mid is ₹500.60; 80,000 shares fill at an average ₹501.40; the rest is cancelled when the price reaches ₹503.00; fees are ₹30,000. Decompose the implementation shortfall and express it in bp of the paper portfolio.

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Commas, ₹, % and 1e-3 notation are accepted.

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