What does TWA mean in PHYSICS

Time-Weighted Average (TWA) is a type of average used in financial calculations for investments and portfolios. It measures the performance of a mutual fund or asset class relative to a benchmark index.

The main advantage of using TWA over other formulas such as arithmetic mean, geometric mean, and harmonic mean is that it considers more accurately the changes in value of an investment over time.

TWA can be helpful when evaluating if a portfolio has outperformed its benchmark or when comparing different funds or asset classes on an equal basis.

To calculate TWA, one must start by calculating the total return for each period within the calculation window and using those returns to calculate the beginning values for each period (except for the first). Then, multiply the investment's return for each period by that period's weighted duration, sum up all the products across all periods, divide it by total duration weights across all periods, then subtract 1 from that answer.

Some considerations when calculating TWA include ensuring accurate data inputs and making sure there is no double counting while also accounting for cash flows into or out of the portfolio during any given evaluation period. Additionally, if there are multiple funds being compared in different currencies then exchange rates should be taken into account as well.