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Optimal VWAP Trading Strategy and Relative Volume

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Author Info
James McCulloch
Vladimir Kazakov
Abstract

Volume Weighted Average Price (VWAP) for a stock is total traded value divided by total traded volume. It is a simple quality of execution measurement popular with institutional traders to measure the price impact of trading stock. This paper uses classic mean-variance optimization to develop VWAP strategies that attempt to trade at better than the market VWAP. These strategies exploit expected price drift by optimally `front-loading' or `back-loading' traded volume away from the minimum VWAP risk strategy.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp201.pdf
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Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 201.

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Length: 32
Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:uts:rpaper:201

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  1. Konishi, Hizuru, 2002. "Optimal slice of a VWAP trade," Journal of Financial Markets, Elsevier, vol. 5(2), pages 197-221, April. [Downloadable!] (restricted)
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