DEFINITION of 'Path Dependent Option'
The right, but not the obligation, to buy or sell an underlying asset at a predetermined price during a specified time period, where the price is based on the fluctuations in the underlying's value during all or part of the contract term. A path dependent option's payoff is determined by the path of the underlying asset's price.
INVESTOPEDIA EXPLAINS 'Path Dependent Option'
A basic American option is one type of path dependent option. Because it can be exercised at any time prior to expiration, its value will change as the underlying asset's value changes. An Asian option, also called an average option, is another type of path dependent option, because its payoff is based on the average price of the underlying asset during the contract term. Similarly, a barrier option would be considered a path dependent option because its value changes if the underlying asset reaches or surpasses a specified price. The lookback option and Russian option are also pathdependent options.

Barrier Option
A type of option whose payoff depends on whether or not the underlying ... 
Asian Option
An option whose payoff depends on the average price of the underlying ... 
Lookback Option
An exotic option that allows investors to "look back" at the ... 
Exotic Option
An option that differs from common American or European options ... 
Underlying
1. In derivatives, the security that must be delivered when a ... 
Exchange Traded Derivative
A financial instrument whose value is based on the value of another ...

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