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Average option
A European-style option whose payoff depends on the average price or rate of the underlying up until maturity, or at least over part of the life of the option, as opposed to the conventional European option whose payoff essentially depends on the price of the underlying at maturity.
(1) The average price or rate of the underlying can be calculated in several ways, for example on the basis of a series of predetermined reference dates. There are two types of average options: the average strike option and the average price or average rate option.
(2) The average option, or Asian option, is a specific type of path-dependent option.
(3) In this context, the term Asian refers solely to the type of option, with no geographic connotation, since this type of option is found on markets outside Asia.
Translations
Synonyms and variations
- Asian option
- Asian-style option
- Reference dates