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How Is a ‘Time-Weighted Average Price’ (TWAP) Used in Settlement?

TWAP averages prices over a specific time interval leading up to expiration to prevent price manipulation at a single point.
Greeks.Live28.10.25

How Is a ‘Time-Weighted Average Price’ (TWAP) Used in Settlement?

A TWAP is a method of calculating an average price over a specific time interval, rather than at a single moment. For futures settlement, the TWAP is calculated by sampling prices at regular intervals leading up to expiration.

This approach prevents price manipulation attempts that target a single settlement time, ensuring a fairer final price.

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