Optimal VWAP Trading Under Noisy Conditions
50 Pages Posted: 1 May 2009 Last revised: 21 Jun 2012
Date Written: July 12, 2011
This article proposes an empirically tractable way to incorporate intra-day noise into a VWAP trading rule. In volatile markets, news arrives unexpectedly and rapidly. This should influence a trader’s trading decisions. However, the literature has not incorporated such information into an algorithmic trading framework. Subsequently, this paper presents a Dynamic VWAP (DVWAP) framework that allows informed traders to utilize random news; and thus, improve trade-execution.
Keywords: VWAP strategies, Algorithmic Trading, Intrday Volume
JEL Classification: C53, G12, G29
Suggested Citation: Suggested Citation