A volume-weighted average price (VWAP) is a proxy for fair market value. It is given by:

VWAP PnL_bp = -1 × side × [(P_avg – VWAP)/VWAP] × 10⁴_bp

Where PnL_bp is the profit and loss metric, P_avg is average price (average execution price of the order), side is a trade side indicator (1 if buy and -1 if sell), and 10⁴_bp is the basis point convertor.

VWAP benchmark allows traders to compare their execution prices with fair market prices. A positive value indicates overperformance and a negative value reflects underperformance.