Implementation shortfall - determine the benchmark price

CFA Level III Portfolio Management
#1

The stock closes Wednesday at $20 per share. Mark thinks the shares could see a rebound over the next few days and decides to place a limit order for 1000 shares at $19.95. The shares dont fall to 19.95 during the day so the stock expired unfilled. The stocks close at 20.05 that day.

On Friday, Mark revises the order and buy 800 shares at 20.06. The stock closes at $20.09.

In the solution, the paper portfolio return is 1000*(20.09-20) = 90 and the real portfolio return is 800*(20.09-20.06)=24

I think the decision price (the one in the paper return formula) must be $20.05 because the manager “decides” this price. So why $20?

Ps: the solution may be confused between benchmark price and decision price. It seems that the terminology of implementation shortfall in CFACurriculum changes over time?

#2

previous day benchmark is always benchmark.

if they gave you thursdays close or opening price on friday then that would be your new benchmark price.

#3

The decision price is the market price when order is placed, so $20. Also in this example you don’t need the benchmark price, only DP and EP. BP is only required if you need to split IS into its components. Total IS is simply DP vs ending value (paper pf.) minus DP vs. EP (taking into account only executed shares, actual pf.).