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Easy · backtesting · Quant Researcher interview question · implementation_shortfall, transaction_cost_analysis, vwap, execution, backtesting
Implementation Shortfall (IS) is a core Transaction Cost Analysis (TCA) metric measuring the cost of executing an order relative to the price at the time of the investment decision, known as the arrival price. It quantifies execution performance by comparing the volume-weighted average price (VWAP) of actual fills against this benchmark. Trading desks use IS to analyze and attribute costs like market impact and slippage, typically expressing the result in basis points. Task Implement the functi