Galina Fund Case Scenario
Galina Fund is an investment fund focusing on small-cap Eastern European equities. Lev Svoboda is the senior portfolio manager for the Galina Fund, which employs its own traders. Svoboda gives head trader Mislav Varga an order for an initial purchase of 2,000 shares of Szabo Technologies (ST), a thinly traded stock, at a limit price of EUR80.10.
Varga and Svoboda view the electronic order book for ST at 9:47:00, just after the day’s first 5,000 shares of ST have traded at a price of EUR79.70. Varga buys 1,000 shares at a VWAP of EUR79.86. Two trades immediately follow: one for 500 shares and another of 400 shares, both at EUR79.95. The next trade occurs at 9:47:15, with Varga buying the second lot of 1,000 shares at an average price of EUR79.99. The limit order book for ST at the time of the first purchase is shown in Exhibit 1, with the four dealers in the stock coded A through D.
EXHIBIT 1
ST Stock Limit Order Book Extract
Dealer | Time Entered | Bid | Bid Size | Dealer | Time Entered | Ask | Ask Size |
C | 9:46:50 AM | 77.65 | 300 | D | 9:46:55 AM | 79.80 | 600 |
B | 9:47:00 AM | 77.65 | 400 | C | 9:46:50 AM | 79.95 | 400 |
A | 9:47:00 AM | 77.65 | 200 | A | 9:47:00 AM | 79.95 | 700 |
D | 9:46:55 AM | 77.65 | 600 | B | 9:47:00 AM | 79.95 | 400 |
C | 9:46:55 AM | 77.55 | 1,200 | C | 9:47:00 AM | 80.00 | 800 |
Can you please calculate the effective spread and VWAP for the above question
Answered earlier….
CFAI answer is incorrect
u may also check the errata