Beginning-of-day (SOD) and end-of-day (EOD) cash flows define the exact timing assumption used to calculate investment portfolio performance and daily operational liquidity.

Beginning of Day

Timing Assumption - Flows occur right as the period opens.

Impact on Returns - Cash is immediately available to earn/lose value.

First-Day Handling - Handles initial funding smoothly by setting baseline.

Distortion Risk - Can over/underweight returns if a massive flow happens mid-day.

Mechanism - Treats all deposits or withdrawals as occurring before market pricing takes effect.

Advantage

Intuitive for tracking capital availability at sunrise.

Disadvantage

Can distort performance metrics if large transactions occur after major price swings.

End of Day

Timing Assumption - Flows occur right as the period closes.

Impact on Returns - Cash does not participate in that day's market return.

First-Day Handling - Fails on day one because initial cash leaves value undefined.

Distortion Risk - Ignores intra-day market price action impact on new capital.

Mechanism - Treats all cash movements as happening after the market closes.

Advantage

Prevents new cash from skewing the day's actual investment return percentage.

Disadvantage

Creates a mathematical breakdown on day one of an empty portfolio since there is no prior starting value.

Many performance systems use a mixed methodology.

• Inflows (SOD): Treated as start-of-day to give them full exposure.

• Outflows (EOD): Treated as end-of-day to let them participate until withdrawal.