What Is a Volume-Weighted Average Price (VWAP) and Why Is It Used? ⎊ Path

What Is a Volume-Weighted Average Price (VWAP) and Why Is It Used?

VWAP is a trading benchmark that calculates the average price of an asset over a specified time, weighted by the total trading volume at each price level. Oracles use VWAP because it gives more significance to prices from exchanges with higher liquidity and larger trade volumes.

This makes the price feed much harder to manipulate with low-volume trades, ensuring a more accurate and robust market price for derivatives settlement.

What Is the Difference between a Spot Price Oracle and a Volume-Weighted Average Price (VWAP) Oracle?

How Can ‘Volume-Weighted Average Price’ (VWAP) Be Skewed by Wash Trading?

What Is the Role of Time-Weighted Average Price (TWAP) in DeFi Oracles?

What Is the Difference between a Volume-Weighted Average Price (VWAP) and a TWAP?

How Can Traders Use Volume-Weighted Average Price (VWAP) to Gauge Execution Quality and Slippage?

Why Is the Time-Weighted Average Price (TWAP) Often Preferred over a Spot Price for Options Oracles?

What Is the Significance of the Volume-Weighted Average Price (VWAP) in Measuring Execution Quality?

What Is the Difference between a TWAP and a Volume-Weighted Average Price (VWAP)?

Glossar

Trading Benchmark

Reference ⎊ A Trading Benchmark is a standardized, verifiable price or index used as a reference point for the valuation, settlement, and risk management of financial derivatives and trading strategies.

Average Price

Calculation ⎊ The Average Price represents the volume-weighted mean execution price of an underlying asset or derivative contract over a specified interval, crucial for settlement procedures in many crypto derivatives markets.