The market price at the moment an order reaches the trading desk or algorithm; the reference point for measuring execution cost.
Most transaction-cost analysis starts here. Arrival is usually taken as the nbbo midpoint when the parent-order is accepted, which makes it observable and hard to argue with after the fact.
Measuring against arrival rather than vwap rewards speed and punishes drift, so arrival-price algos trade more aggressively early.
Example: arrival mid is 25.00. You buy 50,000 shares at an average of 25.06 while the day's VWAP is 25.10. Against VWAP you look good by four cents; against arrival you are down six cents, or $3,000. Both numbers are true; they answer different questions.
Original diagrams for the ideas on this page. Illustrative, not real market data.
VWAP and its standard-deviation bands. VWAP is the day's average price weighted by how much volume traded at each price, so it shows where the bulk of the day's business was done. The bands sit one standard deviation either side, and price here swings between them all session.
Educational only, not advice. Spotted an error? Post in Site Feedback.