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

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

The Time-Weighted Average Price (TWAP) is preferred because it calculates the average price of an asset over a specific period, rather than using a single, instantaneous spot price. This smoothing technique makes the price feed highly resistant to momentary price spikes or flash loan manipulation attempts.

For options, which are longer-term contracts, a TWAP provides a more stable and representative valuation for fair settlement and liquidation.

What Is a “Time-Weighted Average Price” (TWAP) Oracle and Why Is It Preferred over a Spot Price Oracle?

How Does Using a Time-Weighted Average Price (TWAP) Make Oracle Manipulation More Difficult?

What Is the Risk of Using a ‘Time-Weighted Average Price’ (TWAP) Feed?

Why Is TWAP Often Preferred over VWAP for Settlement Purposes?

What Is a Time-Weighted Average Price (TWAP) and When Is It Used Instead of a Spot Price?

What Is the Purpose of the Time-Weighted Average Price (TWAP) in the Mark Price?

What Is a Volume-Weighted Average Price (VWAP) and How Does It Differ from TWAP?

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

Glossar

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.