What you will learn
- Choose a benchmark before routing
- Separate market movement from execution cost
- Control for order size and volatility
- Report uncertain or unobservable fills
Choose a benchmark before routing
Design the experiment around a defined execution question and benchmark. Record all eligible orders, including rejections and non-fills. Restricting the sample to completed favorable fills can misrepresent the implementation problem.
Separate market movement from execution cost
Market movement during delay should not be silently attributed entirely to spread or commissions. Preserve decision, submission, acknowledgement and fill timestamps where available so different components can be investigated.
Control for order size and volatility
Control or stratify by size and volatility when comparing methods. Two routing policies used in very different conditions cannot be compared fairly by raw average price difference alone.
Report uncertain or unobservable fills
Some counterfactual fills are unobservable: you do not know exactly what would have happened to an order never sent. State the modeling assumptions and uncertainty rather than presenting a simulated alternative as an actual execution record.
Worked example
Policy A is used only for small quiet-market orders and B for large volatile-market orders. A lower average shortfall under A does not isolate a policy advantage.
Try it yourself
Design a more informative comparison and identify a limitation that remains even after matching observed conditions.
Show the worked solution
Use predefined comparable groups or a controlled study where appropriate, retain all outcomes and report size/volatility differences. Unobserved conditions and counterfactual queue states may still limit causal attribution.
Apply this to your course project
Compare implementation shortfall under multiple order policies.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.