DECISION LAB

Execution

Interactive execution analytics and optimization tools. Implementation shortfall, market impact modeling, algorithm selection, and transaction cost analysis.

7 Tools Interactive

Vol II Ch 24-27 Source

10 Exercises BUILD

IMPLEMENTATION SHORTFALL

IS = (Paper Return) − (Actual Return) = Delay + Execution + Opportunity

The difference between the return of a theoretical paper portfolio and the actual return after execution costs.

TWAP

Time-weighted execution

VWAP

Volume-weighted execution

Implementation shortfall

POV

Percentage of volume

Interactive Tools

TCA Dashboard

Comprehensive transaction cost analysis with slippage decomposition.

Pre-trade estimates
Post-trade analysis
Benchmark comparison

Market Impact Model

Estimate temporary and permanent market impact from order execution.

Almgren-Chriss model
Power-law impact
Cross-asset spillover

Algorithm Selector

Choose optimal execution algorithm based on order characteristics.

Urgency/size trade-off
Liquidity profile
Benchmark selection

Order Book Visualizer

Visualize limit order book depth and simulate order placement.

Bid/ask depth
Order flow analysis
Fill simulation

Optimal Execution Planner

Calculate optimal trading trajectories to minimize execution cost.

Risk-aversion parameter
Impact vs timing trade-off
Schedule generation

Spread Analyzer

Analyze bid-ask spreads, effective spreads, and realized spreads.

Quoted vs effective
Time-of-day patterns
Spread decomposition

BUILD Exercises

BUILD 1

Implementation Shortfall Calculator

Decompose execution costs into delay, trading, and opportunity

FOUNDATIONAL

BUILD 2

VWAP Benchmark Tracker

Calculate and track VWAP benchmark with fill comparison

FOUNDATIONAL

BUILD 3

Market Impact Estimator

Implement Almgren-Chriss market impact model

INTERMEDIATE

BUILD 4

Optimal Execution Trajectory

Compute optimal trading schedule with risk aversion

ADVANCED

BUILD 5

Full TCA Report Generator

Build complete TCA system with pre/post trade analysis