“Can be applied quickly to enhance trading decisions” is the advantage of VWAP or IS?
- VWAP
• Easily understood.
• Can be computed quickly • Computationally simple. • Most appropriate for comparing small trades in nontrending markets (where amarket adjustment is not needed). + IS • Portfolio managers can see the cost of implementing their ideas. • Demonstrates the tradeoff between quick execution and market impact. • Decomposes and identifies costs. • Can be used in an optimizer to minimize trading costs and maximize performance. • Not subject to gaming.