VWAP Calculation

The Volume-Weighted Average Price calculation is a trading benchmark that weights the price of an asset by the volume traded at each price level over a specific period. It provides a more accurate reflection of the actual price paid by market participants than a simple average.

In derivatives, it is often used to assess execution quality and identify whether a trade was executed at a fair market price. By accounting for volume, it gives more importance to periods with higher trading activity.

This makes it a primary tool for institutional traders looking to minimize their market impact while entering or exiting large positions.