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.
BREAKING DOWN '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 ... 
Call Option
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Exotic Option
An option that differs from common American or European options ...

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What's the difference between a regular option and an exotic option?
Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options ... Read Answer >> 
Are put options more difficult to trade than call options?
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Do you have to be an expert investor to trade put options?
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What does the underlying of a derivative refer to?
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Does the seller (the writer) of an option determine the details of the option contract?
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