Question

3. Based on the last six months of data, suppose that the percent of daily volume that occurs in each hour is as follows:

9:30-10:30          20%

10:30-11:30         10%

11:30-12:30         10%

12:30-1:30           10%

1:30-2:30              10%

2:30-3:30              15%

3:30-4:00              25%

You need to design a VWAP algo to buy 28,000 shares

Start time: 12:30

End time 4:00

Please enter your order sizes at the end of each hour

10:30

11:30

12:30

1:30

2:30

3:30

Close:

Answer 1

the total distribution of orders during a trading day is as follows-
9:30-10:30	20%
10:30-11:30	10%
11:30-12:30	10%
12:30-1:30	10%
1:30-2:30	10%
2:30-3:30	15%
3:30-4:00	25%

We want the Algo to trade only in the hours- 12.30 to 4.00. hence, we will look at the distribution of orders during this period only. Assume for total 100 orders in a day, based on above distribution, the number of orders in the interested trading window is as follows

Time window	Number of orders	% of total orders in time window
12:30-1:30	10	16.67%
1:30-2:30	10	16.67%
2:30-3:30	15	25.00%
3:30-4:00	25	41.67%
Total	60	100.00%

% of total orders in time window   =no. of orders during a time slot/ total no of orders in 12.30-4.00 window

For an order of 28,000 volume, the distributions should be as follows-

Time window	% of total orders in time window	no. of shares ordered
12:30-1:30	16.67%	4,667
1:30-2:30	16.67%	4,667
2:30-3:30	25.00%	7,000
3:30-4:00	41.67%	11,667
Total	100.00%	28,000

no. of shares ordered   = 28,000* % of total orders in the time window 12.30-4