VWAP Strategies

Abstract

The performance of traders is often measured by their ability to trade at prices better than the volume-weighted average price (VWAP). The prevalence of VWAP benchmarks raises several natural questions. When is VWAP a sensible benchmark, and how does it compare with alternatives? How do traders adjust their trading strategies when measured against a VWAP metric? What are the advantages and disadvantages of alternative strategies to achieve execution close to VWAP? The author argues that while VWAP strategies are relatively straightforward from a conceptual viewpoint, their implementation is often more difficult than commonly believed.