Schweser wasn’t so clear on this point, but CFAI had a question on a Mock on it. You use implementation shortfall when you want to trade early because of either information or an upward trending market.
However, what is the delinieation between using VWAP vs TWAP. VWAP is to trade with the way daily volume trades and TWAP is throughout the day evenly. However, when do I use which?
VWAP - Used to fly under the radar. The idea is to keep your trades from standing out.
TWAP - Used in thinly traded markets
Not seeing the rationale for each - can you or someone please provide more color. For thinly traded I think a broker would be best (or where trade as a % of volume is high)
twap = flat, break wrt to time, thinly traded markets
vwap= not urgent, low bid/ask spread, trades throughout the day, based on hist p.
what about trending markets… is there any preference there.
implementation shortfall (especially when it has high urgency of completion) because you are more concerned with reducing opportunity cost
can anyone please clarify this without abbreviations