TWAP vs VWAP Execution Choice - Quant Trader Interview Question
Difficulty: Hard
Category: Market Microstructure
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Topics: execution-algorithms, twap, vwap, market-impact, illiquidity
Problem Description
You are tasked with executing a large order for 100,000 shares of a stock. Consider the following scenarios and determine when you would be more inclined to use a Time-Weighted Average Price (TWAP) algorithm over a Volume-Weighted Average Price (VWAP) algorithm.
Which of the following scenarios would most favor using TWAP over VWAP for executing this large order?
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