یک چارچوب عملی برای برآورد هزینه های معامله و توسعه استراتژی های معاملاتی بهینه برای رسیدن به بهترین اقدام اجرایی

In this paper we provide both a decision framework to estimate transaction costs and develop optimal trading strategies to achieve best execution. The methodology is based on an unbundling approach whereby costs are categorized into transparent and hidden, and fixed and variable components. The classification serves as the foundation for developing execution strategies for a fund's implementation goals. For example, the methodology easily adapts to strategies aimed at preserving asset value, achieving the closing price or volume weighted average price (“VWAP”), and minimizing tracking error. Further, we show how to determine the best execution strategy (“BES”) from a set of optimal strategies given a fund's goal and objectives via a set of decision-making criteria. Ultimately, best execution translates to lower transaction costs and higher portfolio returns.

Transaction costs represent dollars paid by buyers not received by sellers and vice versa. In finance these costs serve as premiums paid above decision prices for buys, and discounts offered below decision prices for sells. Empirical evidence reveals that transaction costs range from 30–75 basis points (bp) on average to more than 200–300 bp for large and illiquid orders (Wagner and Glass, 2001). With such market friction it is small wonder managers often under perform paper portfolio benchmarks. Transaction cost analysis (“TCA”) has evolved into two areas: measurement and estimation. Costs are measured after trading (ex-post) to determine the portfolio slippage due to trading and to evaluate the performance of traders and brokers. Costs are estimated before trading (ex-ante) and used to devise an appropriate implementation scheme. Notable cost measurement research is attributable to Treynor, 1981, Berkowitz et al., 1988, Perold, 1988, Edwards and Wagner, 1993 and Wagner and Glass, 2001. Their work provides evidence that transaction costs add up to more than simply broker commission and spreads. In short, these costs are far from trivial. More recently, TCA research shifted to cost estimation. While this research area has not been given nearly the same level of attention it is nonetheless as impressive. The most notable work here is attributable to Almgren and Chriss, 1997 and Almgren and Chriss, 1999, and Bertsimas and Lo (1998). They show that proper implementation requires simultaneous evaluation of cost and associated trading risk term. We build on this research and provide readers with a framework to estimate costs and develop strategies to achieve best execution.

In conclusion, our transaction cost methodol ogy utilizing a cost a llocation approach is adaptable to any target price or implementation goal aimed at achieving best execution. It is intended to serve as a framework to estimate costs and risk, determine optimal trading strategies, construct the Efficient Trading Frontier, and evaluate best execution. To assist in the assessment of the most appropriate implementation strategy we provided a set of decision-making criteria: (1) minimize cost, (2) balance tradeoff between cost and risk, and (3) achieve price improvement. Ultimately, true best execution lies with the strategy that provides the greatest likelihood of achieving ones implementation goals. Finally, it is essential that managers and traders work toge ther and define appropriate implementation plans that are in sync with the overall investment goals and objectives. Otherwise, it is unlikely best execution will be achieved. In short, in order for portfolios to realize maximum levels of return, managers and traders need to continuously interact to control transaction costs throughout all phases of the investment cycle and establish best execution strategies ex-ante.