How is the realized profit and loss calculation for implementation shortfall determined?

The realized profit and loss calculation for implementation shortfall is indeed determined by considering the number of shares executed relative to the original order amount while also accounting for any price changes that may have occurred from the time the order was placed to when it was executed. This method is crucial as it provides a clear picture of the impact that execution delays and price movement have on the overall trading cost.

When evaluating implementation shortfall, it is essential to understand that the goal is to measure the difference between the expected execution price (based on the benchmark price at the time the order was initially placed) and the actual execution price. Adjusting the number of shares executed by the price changes reflects how effectively the order was filled compared to the ideal scenario, allowing for an accurate measurement of the shortfall. This approach not only captures the effect of the timing of the trade but also illustrates the opportunity cost associated with waiting to execute the order.

The other choices do not adequately represent the components that contribute to the implementation shortfall. While they may touch on transaction costs or the number of shares, they lack the comprehensive consideration of market price changes and the context of order execution. By focusing on both executed shares and price fluctuations, the identified calculation provides a more accurate depiction of the realized profit