Step 6: Trade Allocation

When the last execution of the day is confirmed, it is possible to allocate the executions for the day across the three portfolios that participated in the total order during the course of the day. We constructed the example to have portfolio XXX join the order late and for portfolio YYY to leave early. Figure 5.6 introduces the allocation process.


Figure 5.6 Trade allocation uses trade reports or confirmations to distribute a weighted average cost from all executions across participating portfolios for only those executions in which the portfolios participated.

Portfolio Accounting

At the end of the trading day, Sally ...

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