Volume-weighted average price (VWAP) - Financial definition
Concise definition of the term volume-weighted average price
Calculation method used to determine the acquisition cost of per security for a position that has been acquired through various purchases made at different prices. It consists of summing the cost of all transactions and dividing it by the number of securities.
Comprehensive definition of the term volume-weighted average price
VWAP helps determine the capital gain when selling all or part of a securities position. It is widely used in accounting and for tax-related calculations.
Calculation example:
Let's consider a position of 400 shares which has been acquired in three purchases: 150 shares at 10.50 €, 50 shares at 11.50 € and 200 shares at 9.50 €.
The VWAP for each share would turn out at (10.5 x 150 + 11.5 x 50 + 9.5 x 200)/(150 + 50 + 200) = 10.125 €.