An Asian option or average value option is a special type of option contract. For Asian options the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European option and American option , where the payoff of the option contract depends on the price of the underlying instrument at exercise; Asian options are thus one of the basic forms of exotic options. There are two types of Asian options: fixed strike, where averaging price is used in place of underlying price; and fixed price, where averaging price is used in place of strike. One advantage of Asian options is that these reduce the risk of market manipulation of the underlying instrument at maturity. Because of the averaging feature, Asian options reduce the volatility inherent in the option; therefore, Asian options are typically cheaper than European or American options.
Pricing Asian Options
Asian Option Pricing Guide & Excel Add-in | FinPricing
It is considered "exotic" in the sense that the pay-off is a function of the underlying asset at multiple points throughout its lifetime, rather than just the value at expiry. An Asian option actually utilises the mean of the underlying asset price sampled at appropriate intervals as the basis for its pay-off, which is where the "path-dependency" of the asset comes from. The name actually arises because they were first devised in in Tokyo as options on crude oil futures. There are two types of Asian option that we will be pricing. They are the arithmetic Asian and the geometric Asian.
Documentation Help Center Documentation. All these methods involve some tradeoffs between numerical accuracy and computational efficiency. This example also demonstrates how variations in spot prices, volatility, and strike prices affect option prices on European Vanilla and Asian options.
View product coverage , or market data coverage , or system brochure Four user interfaces: Data API offers programmatic access to the live and historical market data. Excel Add-ins provides spreadsheet based analytic tool. GUI provides visual interface to access all the services. An Asian option or average option is a special type of option contract where the payoff depends on the average price of the underlying asset over a certain period of time.