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Average rate option
An average option type of foreign currency option that pays the difference between a set strike rate and the average exchange rate of the underlying at certain specific dates or during a fixed period over the life of the option.
The payoff on an average rate option differs from that on the conventional European option, which essentially corresponds to the difference between the strike rate and the rate of the underlying at maturity.
Translations
Synonyms and variations
- ARO
- Average rate currency option
- Fixed strike Asian option 2.
- Fixed strike option 2.