Asian Option

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Dictionary Says

Definition of 'Asian Option'

An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option.
Investopedia Says

Investopedia explains 'Asian Option'

This type of option contract is attractive because it tends to cost less than regular American options.

An Asian option can protect an investor from the volatility risk that comes with the market.

Related Definitions

  • American Option

    An option that can be exercised anytime during its life. The majority of exchange-traded options are American.
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  • Average Price Call

    A type of option where the payoff is either zero or the amount by which the average price of the asset exceeds the strike.
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  • Average Price Put

    A type of option where the payoff is either zero or the amount by which the strike price exceeds the average price of the asset.
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    • Bermuda Option

      A type of exotic option that can be exercised only on predetermined dates, typically every month. Bermuda options are a combination of American and European options. American options are ...
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    • European Option

      An option that can only be exercised at the end of its life, at its maturity. European options tend to sometimes trade at a discount to its comparable American option. This is because ...
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    • Exotic Option

      An option that differs from common American or European options in terms of the underlying asset or the calculation of how or when the investor receives a certain payoff. These options ...
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    • Volatility

      1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns ...
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    • Underlying

      1. In derivatives, the security that must be delivered when a derivative contract, such as a put or call option, is exercised. 2. In equities, the common stock that must be delivered ...
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    • Option

      A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to ...
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    • Maturity

      1. The length of time until the principal amount of a bond must be repaid. 2. The end of the life of a security.
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