In finance, time-weighted average price (TWAP) is the average price of a security over a specified time.
TWAP is also sometimes used to describe a TWAP trading strategy, that is a strategy that will attempt to execute an order and achieve the TWAP or better. A TWAP strategy underpins more sophisticated ways of buying and selling than simply executing orders en masse: for example, dumping a huge number of shares in one block is likely to affect market perceptions, with an adverse effect on the price. High-volume traders use TWAP to execute their orders over a specific time so they trade to keep the price close to that which reflects the true market price. TWAP orders are a strategy of executing trades evenly over a specified time period. Volume-weighted average price (VWAP) balances execution with volume. Often, a VWAP trade will buy or sell 40% of a trade in the first half of the day and then the other 60% in the second half of the day. A TWAP trade would most likely execute an even 50/50 volume in the first and second half of the day.
Famous quotes containing the words average and/or price:
“Japanese food is very pretty and undoubtedly a suitable cuisine in Japan, which is largely populated by people of below average size. Hostesses hell-bent on serving such food to occidentals would be well advised to supplement it with something more substantial and to keep in mind that almost everybody likes french fries.”
—Fran Lebowitz (b. 1975)
“Surely the apple is the noblest of fruits. Let the most beautiful or the swiftest have it. That should be the “going” price of apples.”
—Henry David Thoreau (1817–1862)