CFA三级基础段：交易、绩效评估和经理选择（标准版）

andManagerSelection三级培训项目讲师：SessionContent&PROFESSIONALStudySessionStudySession3StudySession4StudySession5StudySession6StudySessionStudySessionStudySessionStudySessionStudySessionStudySessionStudySessionMARKETINPORTFOLIOMANAGEMENTMANAGEMENTFIXED-INCOMEPORTFOLIOMANAGEMENTPORTFOLIOMANAGEMENTFORPORTFOLIOMANAGEMENTMANAGEMENTPORTFOLIOMANAGEMENTFORTRADING,PERFORMANCEANDMANAGERINPORTFOLIOMANAGEMENTRISKMANAGEMENTSS15:Selection•R34andExecution•R35PortfolioPerformance•R36ManagerSelection34andtoFrameworkandSelection••Prices••Choices•Algorithmic•ComparisonGovernance1.Portfoliototheirportfolioholdingstoensurealignmentwiththeunderlyingobjectives.ProfitseekingRiskmanagement/hedgingneedsflowneedsactions/indexreconstitutions/margincalls1.1seekingseekingTheprimaryaddedthatmostactiveseektoprovideisrisk-adjustedoutperformancerelativetotheirbenchmark.&alphatohowquickly(aggressively)orslowly(patiently)theorderisoverthetradingtimehorizon.Alphatotheerosionordeteriorationinshort-termalphaonceinvestmentdecisionismade.Managersfollowingashort-termalpha-drivenwillwithtoalphaitdissipatesManagersfollowingalonger-termwillwithlessifalphaistobemanager(long-termprofitseeking)1.2needsRiskmanagement/hedgingneedsAstheandtheriskenvironmentchange,portfoliostobeorrebalancedtoatrisklevelsrisk.Durationmatch,management.Portfolioalsotoriskswhentheyanviewonthespecificriskinquestion.Currencyhedging,option1.3CashneedsCashflowneedsThistypeoftradingisclientdriven,arisingfromfundinflowsandoutflows(redemptions,liquidations).flowneedsinvolvehighorlowurgencyhigh:collateral/margincallslow:longer-termclientassetallocationchangesminimizeonaportfolio,fundinflowsbeequitizedusingfuturesoruntiltheportfoliorebalanceorpositionsintheunderlyingcanbeEquitizationtoaoftemporarilycashusingfuturesortotheequityintheunderlyingsecuritieslongerEquitizationbeifinflowsintoaportfoliohinderedbylackofliquidityintheunderlyingsecurities.1.4actions/indexcallsbeliquiditydrivenresultingfromclientactivityorreconstitutions.alsobebysuchactivitycorporateactionsandoperationalneeds.Dividend/coupondistributions,margincalls,andofderivativecontractstrackingportfolios,suchchangesadditions,deletions,andconstituentweightchangesgenerallyinthemanager’sportfoliotoreflectbenchmarkMarginorcallsdrivehighlevelsofurgencgivenaneedtheimmediatesaleofportfolioholdings.Inthesecases,typicallyusingend-of-dayclosingpricesbecausethesepricesusedfundandbenchmarkvaluation.2.InputsSecurityUser-BasedConsiderations:RiskandRiskPricesBenchmarksBenchmarksBenchmarksPriceBenchmarksStrategiesAlphaAlphaRiskClientNew2.1Side:thesideordirectionoftheorder—buyorsell.Ifpricesrising,abuylongerthanasellgiventhepresenceofmore(liquiditydemanders)than(liquiditysuppliers)intheathatconsistsofonlybuysoronlysellswillriskthanaofbuysandsellsinwhichthesecuritiesoffsettingriskSize:theamountorquantityofthesecuritybeingRelative(%aofthesecurity’sdailyvolume2.1SecuritySecuritytype:typesecuritybeing(underlying,Americanglobalreceipt).Short-termalpha:alpha)ariseanaa(i.e.,insecurityprice.Highalphaloss,toitisparticipants.Pricevolatility:pricevolatilitythepricevolatilityasecurityprimarilyaffectsrisktheriskisriskanadversepricemovementovertoachangeinthethesecuritybecausetrading-inducedSecuritieshigherlevelspricevolatilitytoriskthansecuritiespriceSecurityliquidity:liquiditysecurity(e.g.,bid–asksize).Allelsebeingequal,riskandsuchas2.1ConditionsLiquiditycrises:deviationsfromliquidityduetoperiodsofcrisis.Duringeventsorcrises,thevolatilityandliquidityoftheandthesecuritywillbecriticaltoconsiderconditionsresultinsuddenandsignificantdeviationsfromnormalpatterns.Duringnormalenvironment,somecompanieswillwhichresultinthembeingaddedorfromthewidelyusedstockindex.Whenthishappens,liquidityintheirstockstoimproveortheirstocksbecomebroaderorvolatilityandliquiditydynamic.Theyalsogenerallynegativelyrelated,whichbecomesespeciallyduringperiodsofcrisis,whenvolatilityincreasesandliquidity2.1User-BasedRiskAportfoliomanagerorwithahighlevelriskistobemoreconcernedaboutrisktowithtotheassociatedwithtradingmore2.1Riskimpactisthepriceimpactinasecuritycausedfromtradingandcanoneofthecostsintrading.minimizeinformation,portfoliotohidetheirtradingactivitybyacrossdifferentvenuesandusingamixoftypes,suchandlimitriskisthepriceimpactresultingfromachangeinthefundamentalofthesecurityandisbypricevolatilitdilemma.tooresultsintoomuchimpact,buttradingtooslowresultsintoomuchrisk.inselectingaistochoosethepricetimetrade-offgivencurrentconditionsandtheuniquecharacteristicsofthe2.2Pricesprices,alsotoprice,usedindeterminingpricesandincalculatingactualpost-purposes.CategoriespricesbenchmarksbenchmarksbenchmarksPricebenchmarks2.2Prices,thepricethebenchmarkisknowntradingbegins.DecisionpriceQuantitativeportfoliowilloftheirdecisionpricebecausethesepricesbeinputsintotheirquantitativemodels.closeApreviousclosebenchmarkisspecifiedbyquantitativewhoincorporatethepreviouscloseinaquantitativemodel,portfolioorscreeningmodel.Thepreviouscloseisusedathedecisionpricebyquantitativeportfolio2.2Prices,thepricethebenchmarkisknowntradingbegins.OpeningpriceThisbenchmarkpriceismostspecifiedbyportfoliowhobegintradingtheopenandwishtominimize.Theopeningpriceisusedathedecisionpricebyfundamentalwhoinasecuritylong-alphaorpotential.Theopeningpricedoesassociatedovernightrisk,ortheriskthatpriceswillatopentoincorporateinformationthecloseofthepreviousbusinessIftheistobeintheopeningauction,thenusingtheopeningpriceabenchmarkisnotappropriatebecausetheitselfcaninfluencethebenchmark.2.2Prices,thepricethebenchmarkisknowntradingbegins.Arrivalprice.Thepriceisthepriceofthesecuritythetimetheisintothe.Inthesecases,theportfoliomanager’sgoalistotransactorclosetoprices.Portfoliowhobuyingorsellingonthebasisofalphaexpectationsoramispricingwillspecifypricebenchmarkurgency).Portfoliolookingtominimizetradingcostwillalsousepricebenchmark.2.2Prices,thepricethebenchmarkiscomputedonthebasisofpricesthatoccurduringthetradingperiod.withoutviewsshort-termpricemovementswhowishtoparticipateinvolumesoverthetypicallyusebenchmark,suchor2.2PricespriceThebenchmarkpriceisthevolume-weightedpricealloverthethehorizon.PortfoliospecifythebenchmarkwhentheywishtoparticipatewithvolumeoverthePortfoliowhorebalancingtheirportfoliosovertheandbothbuyandsellselecttheapricebenchmark.Portfoliowhorebalancingandusingcashfromselltopurchasebuywillalsoselectbenchmark,suchDoingsoallowstheportfoliotostructuretheirovertimetoensurecashfromsellissufficienttofundremainingbuyDoingsoallowstheportfoliotostructuretheirovertimetoensurecashfromsellissufficienttofundremainingbuyorders.2.2PricesTime-weightedpriceAnequal-weightedpriceofalloverthePortfoliochoosetheywishtopotentialoutliers.outliersbecausedbytradingabuytheloworasellthehigh.Ifparticipantsnotabletofullyparticipateinthesethenbeamoreappropriatechoice.Thebenchmarkisusedbyportfolioandtoandreasonabletradingpricesinenvironmentswithhighvolumeuncertaintyandsecuritiesthattoinvolumethroughoutthe2.2Prices,thepricethebenchmarkistradingiscompleted.Closingprice.Portfoliofundsattheclosingpriceontheorwhowishtominimizetounderlyingbenchmarkprice,suchfunds,selectapost-tradeprice,suchtheofficialclosingprice.:minimizespotentialtracking:notknownuntiltradingiscompleted.2.2PricesPrice,thepricethebenchmarkisspecifiedapricetomeetormorePortfolioseekingshort-termalphaselectalternativebenchmarkknownapricebenchmark.Inthiscase,aportfoliomanagerwouldtotransactinasecurity—believedtobeundervaluedorovervalued—aprice.2.3Theprimaryofatradingistobalancethealphaassociatedwithtradingtheinamannerconsistentwiththeportfoliomanager’stradingobjectives,riskandotherknownconstraints.involvingequities,income,andderivativesexplainedfollows:Short-termalpha:short-termalpha-drivenequity(highurgency).Long-termalpha:long-termalpha-drivenfixed-income(lowurgency).Riskrebalance:buy/selltorebalanceariskCashflowdriven:clientredemptiontoproceeds.New:cashequitization(derivatives)toanewclient3.ImplementationChoicesAlgorithmicExecutionAlgorithmClassificationsScheduledLiquidityseekingArrivalpricestrategies/liquiditySmartMarketsEquitiesIncomeOver-the-CounterSpotExchange(Currency)3.1Aofimplementationchoicesbasedonthespecific,,andinvolved.Thehigher-touchinvolveofhumancompletion.Inprincipal,theassumesallorpartoftherisktotradingthepricingitintoherspread.In,theistofindtheothersideofthebutactsagentonlandrisktradingtheremainswiththebuy-sideportfoliomanagerorinsecuritiesahigher-touchapproach.Avariationofquote-drivenusedtolessliquidsecuritiesisa(RFQ).3.1inliquidsecurities,low-touchAlternativetradingtradingfacilities(MTF)Non-tradingvenuesthatbringtogetherandtofindtransactioncounterparties.access(DMA)givesallparticipantsatodirectlywiththebookofusuallythroughaconnectivity.pools.3.2Algorithmicisthecomputerizedofthedecisionfollowingaspecifiedsetoftradinginstructions.algorithmsprimarilyusedtwo—andprofitgeneration.algorithms.AnalgorithmiswithtransactingdecisionmadebytheportfolioThemanagerdeterminestobuyorsellonthebasisofhisandobjectiveandthentheintothealgorithm.Profit-seekingalgorithms.Aprofit-seekingalgorithmwilldeterminetobuyandsellandthenimplementthosedecisionsintheefficientlypossible.Profit-seekingalgorithmsusedbyelectronicquantitativefunds,andhigh-frequency3.2.1Scheduled)Scheduledalgorithmsinwhichportfolioordoofpricemovementduringthehorizon.ofvolume)algorithms(alsoknownparticipationalgorithms)sendfollowingavolumeparticipationschedule.Theywillautomaticallyofincreasedliquidityconditionsbytradingmorewhenisampleliquidityandwillnotintimesofilliquidity.incurhigherbycontinuingtobuypricesmovehigherandtosellpricesmovethewithinthetimeperiodspecified.3.2.1Scheduled()andalgorithmstothefollowingatime-specifiedschedule,tradinganumberofwithinthespecifiedtimealgorithmsslicetheintosmalleramountstosendtothefollowingatimeslicingschedulebasedonhistoricalvolumeprofiles.ThesealgorithmstypicallyahigherofthetheopenandasmalleroftheduringBecauseofthis,thecurveissaidtoresembleaU-shapedcurve.Followingaschedulealgorithmsdonotbeoptimalilliquidstocksbecausesuchalgorithmstheincasesvolumes3.2.1Scheduled(algorithmsslicetheintosmalleramountstosendtothefollowingequal-weightedtimeschedule.Anofatimeslicingisthatitthespecifiednumberofwithinthespecifiedtimeperiod.500010:00a.m.and1:00p.m.Aofatimeslicingisthatitwilltheintimesofinsufficientliquidityandwillofincreasedliquidityconditions3.2.1ScheduledScheduledalgorithmsinwhichportfolioordoofpricemovementduringthehorizon.Thesealgorithmsalsousedbyportfolioandwhorisktolerancelongertimeperiodsandmoreconcernedwithminimizingimpact.Scheduledalgorithmsappropriatewhentheisrelativelysmall(e.g.,nomorethan5%10%ofvolume)thesecurityisrelativelyliquid,orthepartofarisk-balancedandtradingallasimilarpacewillmaintaintheriskbalance.3.2.2LiquidityseekingLiquidity-seekingalgorithms,alsotoopportunisticalgorithms,ofliquidityacrossmultiplevenuesbyliquidityaprice.“liquiditysweeping”orthedarkpoolsLiquidity-seekingalgorithmsthattheportfoliomanagerorwouldtoquicklywithoutaimpactonthesecurityprice.3.2.3ArrivalpriceArrivalpricealgorithmstotopricesthetimetheisArrivalpricealgorithmswillmoreaggressivelythebeginningoftradingtomoretotheprice,knownaloaded.timeschedulebasedorvolumeparticipationbasedArrivalpricealgorithmsusedinwhichtheportfoliomanagerorbelievespriceslikelytoduringthe.ExampleAportfolioidentifiedawithlong-termpotentialwouldtoplaceanrelativetothevolume.isveryliquidshort-termalphapotential.portfolioshort-termbuyingotherparticipantsintotheclose,aheadtheearningscallscheduledlaterintheExplainthefollowingalgorithmsused:price,(b)darkand(c)SOR.DiscusswhichofthealgorithmsismosttotradingthisExampleSolutionArrivalpricealgorithmsusedrelativelyliquidsecuritiesandwhentheisnottoasignificantimpact.Arrivalpricealgorithmsalsousedportfolioandhigherlevelsofriskandwishtomoreaggressivelypacetoreducetheriskassociatedwithtradingoverlongertimehorizons.algorithmsappropriatetradingsecuritiesthatrelativelyilliquidorthatrelativelywidebidorrelativelyinwhichtradingintheopenistoasignificantpriceimpact.theyusedbyportfolioandwhoconcernedwithinformationthatoccurpostinglimitinlitvenues.Giventheirhigherriskofunfilledexecutions,thesealgorithmsalsousedwhenthedoesnotneedtobefilledinitsentiretyExampleSmartroutingusedtoelectronicallysendsmallintotheBasedonprevailingconditions,SORswilldeterminewhichdestinationsthehighestprobabilityoflimitandwhichtradingvenuesthepricesandwillSORscontinuouslymonitorconditionsintimeinbothlitanddarkAnpricealgorithmwouldbemostappropriatetradingthisbecausetheportfoliomanagerhaspriceInthiscase,theportfoliomanagertomoreaggressivelytocapturealphaoflesspricesintheBytradingthemoretheportfoliomanagercanmorepricesofthepricemovementandthelesspricesfromotherparticipants’buyingintotheclose,inlinewithhis3.2.4DarkDarkalgorithmsfrom“lit”thesealgorithmsinopaque,orlessvenues,suchdarkpools.algorithmsusedintradingwhenportfolioandconcernedwiththatoccurfrompostinglimitinlitvenueswithandpost-tradeThesealgorithmsfor:istothetosignificantimpacttradingsecuritiesthatrelativelyilliquidorrelativelywidebiddoesnotneedtotheinitsentirety3.2.5Smart(SORs)TheSORwilldeterminethedestinationwiththeprobabilitythelimitandthevenuewiththeprice.SORscontinuouslymonitorconditionsintimeinbothlitanddarkSORsusedthatsufficientlysmallthattheywillnotaimpactifsentSORsalsousedthatimmediatebecauseofimminentpricemovement,highportfoliomanagerorriskorabnormallyhighrisklevels.UsingSORsisalsoappropriateincasesthemovesMarket.SORsusedthatsufficientlysmallthattheywillnotaimpactifsentLimitSORsalsousedthatsmallenoughthatpostingthealimitwillnotinformationtotheandmoveprices.3.3EquitiesEquitiesgenerallydarkpools.knownlitopposedtodarkbecausetheyprovidepre-tradetransparency—limitthatreflectintentionsside(buyorsell),price,andDarkprovideanonymitybecausenopre-tradetransparencyimplementationchoices.Equitiesthetechnologically.trades,particularlyinlessliquidsmall-capstocks,generallyhigh-touchrisktrades,theactsdealerandbeusingtradingalgorithms(particularlymoreliquidlarge-capstocks)lessliquidsecurities,ahigh-touchagencyapproach.smallinliquidsecurities,mostbuy-sideuseelectronictrading.3.3Fixed-incomesecuritiesgenerallyonbutinadealer-centricstructuredealersinthesecurities.illiquid,off-the-runbonds).implementationchoicesislimitedalgorithmicinbondon-the-runrecentlyissued)USotherfixed-incomeinstruments,high-touchparticularlyandlessliquidsecurities.Smallusuallyimplementedthroughrisk(viaRFQs),(principalgenerallyimplementedusingahigh-touchapproach,(agencyof).3.3derivatives(optionsMostofthetradingvolumeinderivativesisconcentratedin.implementationchoicesElectronicispervasive,andalgorithmicisgrowing.thebook”depthisrelativelygood.Inthesecases,themostaggressivelimitontheothersideandthendecreasinglyaggressivelimituntilthehasfilled.generallyimplementedelectronicallythroughalgorithms.Buy-sidegenerallyuseaccess,particularlysmall.3.3derivativesderivativehistorically,withlittlepublicaboutprices,andstructuregenerallyimplementedriskriskistoawhothecontractintohisgenerallyimplementedusingahigh-touchagencythetoandurgentRFQsgenerallytomultiplecompetinganon-urgentmostlyusingalgorithms(suchorahigh-touchagencyapproach.SmallusuallyimplementedusingDMA.SummaryimplementHigh-touchPrincipal:urgentAgency:non-urgentAutomatedExecutionNon-exchangeDMA:Buy-side,smallderivatives,non-urgent(原版书）,Urgentpool:donotneedtoallnon-urgent,informationnotconcernedaboutpricemovement,non-urgent,risk-tolerance,relativelysmall,relativelyliquiditySummaryAutomatedExecutionLiquidityseeking:quicklywithoutimpactArrivalprice:moreaggressivelytrading,担心movement,urgent,high-levelofriskrelativelyrelativelysmallormediumSORs:同时监控lit&dark,sufficientlysmall;4.MeasurementImplementationShortfallExpandedImplementationShortfallArrivalpriceonCloseAdded4.1TheimplementationmeasureisthemeasuringthetotaloftheIScomparesaactualwithitspapertransactionsbasedondecisionprice).Thepaperreturnshowsthehypotheticalthatthefundwouldifthemanagerabletotransactallatthedesireddecisionpriceandwithout(withnofriction).IS=–Actual4.1=푷−푷푺=푺푷−푺푷풅풏풅풏StheS>0indicatesabuyS<0indicatesasell푃thepricethetimeofthedecision푑푃thecurrentprice푛Actual=(s)(푷)−sp−푭풆풆풔풋풏풋풋sandpthenumberofandthetransactionprice푗푗ofthethsthenumberofofthethatin푗theincludesallcostspaidbythefundtocompletethe4.1ThisISformulationdecomposesthecostoftheintocategories:(Delayopportunityfees.occursfromthebuyingand/orsellingofthewhichcausesbuytobecomeandselltoinvalue,thuscausingthefundtoincurhigherandlowerrealized.(1991)furthertheISmeasuretothecostcomponentintoacomponentandatrading-relatedcomponent.Delayariseswhentheistotheinatimelymannerandtheassetexperiencespricemovement,makingitmoreexpensivetotransact.4.1OpportunitycorrespondstotheoftheItisthecostassociatedwithbeingabletotransacttheentirethemanager’sdecisionpriceandisduetopricemovementoverthetradingperiod.Thecomponentincludesallexplicitfees,suchcommissions,andISIS=+Opportunity+ExpandedImplementationExpandedIS=Delay++Opportunity+4.1IS=sp−푠푃+푺−푠푷−푷+푭풆풆풔푗풋푗풅푗풏풅OpportunityExpandedIS=(푠)푃−(푠)푃+푠푝−푠푃+푺−푠푷−푷+푭풆풆풔푗ퟎ푗풅푗풋푗ퟎ푗풏풅Opportunity푃theprice04.1OnImpulseatperOnbegins,amanagerdecidestoAngoestodesktoatpergoodbenchmarkpriceisatperNopartlimitisfilledandpricerisestoAdditional:buy-sidedeskreleasestothereceivingit,priceisOndesktriestoanewlimittoatpergoodDuringatperCommissionsandthisatperNofurthertoisandmanagerinitiallyspecifiedSolution:canthisISdownfollows:DelayTradingFixedMondayTuesdayWednesday£10.00£10.03£10.05£10.08Paperportfolio#1000@$10.00OpportunityDelay,whichreflectsthepricemovementassociatedwithnotsubmittingthetotheinatimelymannerandisbasedontheamountofintheorder:(700×£10.03)–(700×£10.00)=£7,021–£7,000=£21.,whichreflectsthepricepaidon(700×£10.07)–(700×£10.03)=£7,049–£7,021=£28.Opportunity,whichisbasedontheamountofleftandreflectsthecostassociatedwithnotbeingabletoallthedecisionprice:(1,000–700×(£10.08–£10.00)=£24.fees,whichequaltoexplicitpaid:£14.implementationshortfall=£21+£28+£24+£14=£87.TheISprovidesfurtherinsightintothecausesofcosts.Thecostis£21,whichaccounts24.1%(£21/£87)oftheIScost,theopportunitycostof£24accounts27.6%(£24/£87)oftheIScost.often,costandopportunitycostaccountthequantityofcostduringimplementation.Thesecostscanbeeliminatedwithpropertransactioncostmanagementtechniques.4.1Delaycanbebyainplacethatprovideswithmetrics.InthecostcomponentshouldofPortfoliocanuseIStohelpdeterminethewithintheportfoliomanager’spriceandtominimizetheopportunityoftheOpportunitycostisnotmeanandacosttothefund.Thisisduetoreasons:pricemovementilliquidity.Aportfoliomanagerdecidestobuy100,000ofRLK9:00a.m.,whenthepriceis$30.00.Hesetsalimitpriceof$30.50theThebuy-sidedoesnotthetotheuntil10:30a.m.,whenthepriceis$30.10.Thefundischargedacommissionof$0.02/shareandnoothertheendofthed80,000andRLKcloses$30.65.andsummarizedfollows:StockSideRLKShares1234SharesCalculatecost.b.Calculateopportunitycost.c.Calculated.Calculateimplementationshortfallinbasispoints.Discusshowopportunitycostcouldbeminimizedthef.Calculatecost.g.Calculatetradingcost.h.Showimplementationshortfallinbasispoints.i.DiscusshowcostcouldbeminimizedtheSolution:a.iscalculatedthedifferencethecostsoftheportfolioandthepaperportfolio.Itreflectstheprice(s)paidtheamountofinthethatactuallyfilled,orExecutioncostcanbecalculatedfollows:퐄퐱퐞퐜퐮퐭퐢퐨퐧퐜퐨퐬퐭=(30,000×$30.20+20,000×$30.30+20,000×$30.40+10,000×$30.50)–80,000×$30.00=$2,425,000$2,400,000=$25,000Opportunityisbasedontheamountofleftintheandreflectsthecostofnotbeingabletoallthedecisionprice.Opportunitycostcanbecalculatedfollows:Opportunitycost=(100,000–80,000)($30.65–$30.00)=$13,000Solution:equaltoexplicitpaidandcanbecalculatedfollows:=80,000×$0.02=$1,600Implementationcanbecalculatedfollows:Implementationshortfall=$25,000+$13,000+$1,600=$39,600Theimplementationshortfallisinbasispointsfollows:ImplementationshortfallbpsImplementationshortfall($)=×bps(Totalshares)(P)d=132bpsSolution:e.Minimizingopportunity:BasedonthedecompositionofIS,theportfoliomanagerincurredopportunitycostof$13,000on20,000Theopportunitycostcouldbebyreducingquantitytoathatcanbeabsorbedintothetheportfoliomanager’spriceorInthisopportunitycost32.8%($13,000/$39,600)oftheIScost.Iftheportfoliomanagerhadknownthisinhecouldreducedtheoftheto80,000andthe$600,000(20,000×$30.00/share=$600,000)inhissecondmostf.Delaycanbecalculatedfollows:cost=80,000×$30.10−80,000×$30.00=$8,000Solution:g.canbecalculatedfollows:cost=(30,000×$30.20+20,000×$30.30+20,000×$30.40+10,000×$30.50)–80,000×$30.10=$2,425,000$2,408,000=$17,000implementationcanbecalculatedfollows:ExpandedIS=cost+cost+Opportunitycost+=$8,000+$17,000+$13,000+$1,600=39,600Thecostis$8,000,whichaccounts20.2%($8,000/$39,600)oftheIScost,theopportunitycostof$13,000accounts32.8%($13,000/$39,600)oftheIScost.Solution:i.Minimizing:Thecostof$8,000accountsasizableportion(20.2%)oftheIScostandcouldbeminimizedbyaprocessinplacethatprovidesthebuy-sidewithperformancemetrics.Thiswouldallowthetoquicklyidentifytheand/oralgorithmtothegivenitscharacteristicsandcurrentconditions,minimizingthetimereceiptand4.2thequalityoftheandtheperformanceoftheand/oralgorithmused.techniquesmeasurecostusingdifferentbenchmarks(costanalysisenablestomanagetradingcostsandtradingactivitiescanbeimprovedthroughtheuseofappropriatetradingpartnersandvenues.costcalculationssuchthatapositiveindicatesandunderperformancecomparedwiththebenchmark.Anegativeindicatesasavingsandisacomparedwiththebenchmark.4.2intotal($)∗퐶표푠푡$=×(푃−푃)×푆ℎ푎푟푒푠inper∗퐶표푠푡$/푠ℎ푎푟푒=×(푃−푃)inbasispoints∗(푃−푃)퐶표푠푡푏푝푠=××푏푝푠푃∗Side:Buy;-1푃=priceof∗푃=price=4.2ArrivalPriceThepricebenchmarkthedifferencetheprice)thetimethetotheandtheactual0pricethefund.Thisbenchmarkisusedtomeasurethetheincurredwhilethebeinginthe(푃−푃)04Arrivalcost=××10푏푝푠푃04.2Portfoliousethebenchmarkameasureofwhethertheyandpricesoverthetradingperiod.Sincethecomprisesallactivityoverthedallbuyingandsellingofallotherparticipants,andnoise,itprovideswithareasonableindicationoftheparticipantsoverthe(푃−푉푊퐴푃)4VWAPcost(bps)=××10푏푝푠푉푊퐴푃4.2Thebenchmarkisalternativetodeterminewhetherthefundachievedandpricesoverthetradingperiodandisusedwhenwishtopotentialpriceoutliers.(푃−푇푊퐴푃)4TWAPcost(bps)=××10푏푝푠푇푊퐴푃4.2CloseTheclosingbenchmark,alsotoMOCbenchmark,isusedprimarilybyandthatwishtoachievetheclosingpriceontheandcomparetheiractualtransactionpriceswiththeclosingprice.Doingsothatthebenchmarkcostmeasurewillbewiththevaluationthe.Theclosingpricebenchmarkisalsothebenchmarkthatiswiththecalculation.(푃−퐶푙표푠푒)4Close(bps)=××10푏푝푠퐶푙표푠푒4.2Thecostisaperformancemetricusedbyandtohelptheduetotradingthefromthemovementinthesecurityprice.Thecostiscalculatedbysubtractingthecostduetomovementsidefromthecostofthe–β×βthetotheunderlying푉푊퐴푃−)4Indexcost(bps)=××10푏푝푠Aportfoliomanagerasellpriceof$29.50.Thepricethetimetheintothe$30.00.Thepricethetimeofentry$500,andoverthehorizon$495.Thestockhasatotheof1.25.1.Calculatecost.2.Calculatecost.3.Calculatecost.Solutions:1.Calculatecost.(푃−푃)0Costbps=××bps푃0$29.5−=−1××bps=166.7bpsInthisthecostiscalculatedtobe+166.7bps,indicatingthattheunderperformedtheprice.Althoughthisistrue,muchofthepricesduetomovementthaninferiorperformancefromtheoralgorithm.Thissellinafallingwhichincostof166.7bpstheSolution:2.Calculatecost.푉푊퐴푃−)Costbps=××bps−=−1××bps=bps3.Calculatecost.cost(bps)=Arrivalcost(bps)–β×cost(bps)=166.7bps–1.25×100bps=166.7bps–125bps=41.7bps125bpsofthiscostduetomovement,whichwouldoccurredifthehadnotintheThus,thecostthisis41.7bps.4.2AddedAnothermethodologyusedbytotradingperformanceistocomparetheofthewiththeestimated.Thismetrichelpsfundtheaddedbytheirand/oralgorithmsduringtheoftheAdded=Arrival–Considerthefollowingfacts.Aportfoliomanagerabuypriceof푃=$50.35.ThepricethetimetheintotheP=$50.00.Priortotrading,thebuy-side0performspre-tradeanalysisoftheandfindsthatthecostoftheis60bps,basedoninformationpriortotrading.Thepre-adjustmentiscalculatedfollows:Solutions：Arrivalcost(bps)=×(푃−푃)00×104푏푝푠(50.35−50)4=+1××10푏푝푠=70bps50Added=Arrivalcost-cost=70-60=10bpsThecostinthisis10bps,indicatingthatthefundunderperformedpre-tradeby10bps.5.Majorthatassetinplaceapolicythatclearlyandcomprehensivelyarticulatesapoliciesandescalation.Theobjectiveofapolicyistoensuretheassetmanager’sandorder-handlingproceduresinlinewiththeirfiduciarydutytoclients.Apolicyneedstoincorporatethefollowingaspects:Meaningofdeterminingtheoptimalapproach;HandlingtradingListingofeligibleandvenues;Aprocesstomonitorarrangements.5.MeaningwithintheRegulatorypricetradingcostsspeedoflikelihoodofandsettlementoftheRatherthansimplytryingtothepricethepossibletradingcost,involvesidentifyingthemostappropriatetheseaspects.5.UsedtoDeterminetheOptimalUrgencyofofthesecuritieso