Asian-style option - Financial definition
Financial acronyms
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Concise definition of the term Asian-style option
An option whose payoff depends on the average of the underlying's value on a determined set of dates during the option's life. The exercise type of an Asian option is usually European, but the specification of early exercise provisions based upon an average-to-date is possible.
Comprehensive definition of the term Asian-style option
There are two basic forms of Asian-style options:
Average rate options (or average price options) are cash settled options whose payoff is based on the difference between the underlying's average value during the life of the option and a fixed strike.
Average strike options are either cash settled or physically settled options. They are structured like vanilla options except that their strike is the average of the underlying's value during the life of the option.
Average values can be calculated either arithmetically or geometrically.