Back To Product List. 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. The payoff is different from the case of a European option or American option, where the payoff of the option contract depends on the price of the underlying stcok at exercise date. Asian options allow the buyer to purchase or sell the underlying asset at the average price instead of the spot price. Asian options are commonly seen options over the OTC markets. Average price options are less expensive than regular options and are arguably more appropriate than regular options for meeting some of the needs of corporate treasurers.
Pricing Asian Options Using Maple - Maple Programming Help
A Call option represents the right but not the requirement to purchase a set number of shares of stock at a pre-determined 'strike price' before the option reaches its expiration date. A call option is purchased in hopes that the underlying stock price will rise well above the strike price, at which point you may choose to exercise the option. Exercising a call option is the financial equivalent of simultaneously purchasing the shares at the strike price and immediately selling them at the now higher market price. A Put option represents the right but not the requirement to sell a set number of shares of stock which you do not yet own at a pre-determined 'strike price' before the option reaches its expiration date. A put option is purchased in hopes that the underlying stock price will drop well below the strike price, at which point you may choose to exercise the option. This information may help you analyze your financial needs.
Asian option also known as average price option is an option whose payoff is determined with respect to the arithmetic or geometric average price of the underlying asset over the term of the option. While the payoff of a standard American and European option depends on the price of the underlying asset at a specific point of time i. There are two types of Asian options with respect to the method of averaging: in arithmetic Asian option, the arithmetic average of the price of the underlying is used in payoff calculations; while in geometric Asian options, geometric average is used. Asian options have relatively low volatility due to the averaging mechanism.
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