What is the calculation for delay costs?

The calculation for delay costs accurately reflects the impact of execution delays on trades and is connected to the efficiency of a trading strategy. The correct method identifies the number of shares traded and incorporates the order amount adjusted by price differences. This approach expects that delays can lead to price changes, therefore affecting the overall cost of executing the trades.

By considering the number of shares in conjunction with the order amount and any price differences, this formula quantifies the economic impact of not executing trades promptly. In a dynamic market, price slippage can occur, making it essential to factor in those variations to derive the true costs incurred due to delays.

In this context, analyzing how other choices fall short clarifies why this one stands out. For instance, calculating the number of trades executed divided by the total order value does not directly capture the consequences of timing and market conditions. Similarly, multiplying market volatility by total order size does not effectively address the specific costs associated with missed or delayed trades. Lastly, while factoring total missed trades multiplied by the average market price seems plausible, it neglects the precise influences of timing and order adjustments that can lead to higher or lower costs than initially anticipated.