Asian Option

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Definition: Asian Option

Asian options are one of the most well known forms of exotic options. They derive their name from the fact that they were first introduced in Tokyo, Japan.

They are a standard options contract with the difference from an American/European option being that the pay-off is calculated by using an average price of the underlying over a pre-decided period rather than the price of the underlying at exercise as is the case in an American/European option.

These options reduce the volatility in the volatility in the price of the underlying due to which they are sold at a low cost.


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