Exotic Options - Asian Options

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Asian Options are options whose payouts depend on the average price of the underlying asset over a specific period, generally, the life of the option. These options fall under two broad categories:

  • Average Price Options: The payoff at maturity is equal to the average price of the underlying asset over a period minus the fixed strike price for the option.
  • Average Strike Options: The payoff is equal to the price of the underlying asset at maturity minus a variable strike, which is equal to the average price of the underlying asset over a period.

In most cases, these options are structured to be exercised at maturity (like European Options). However, some special structures allow the options to be exercised anytime and pays out based on average-to-date price of the underlying assets.

This page is part of the Wikinvest Guide to Options. Related articles within this guide include:

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