An Asian option is an option where
A) The underlying is the average of the stock price for a specified period.
B) The strike price is the average of the stock price over a specified period.
C) The average can be an arithmetic or geometric average.
D) All of the above are possible in an Asian option.

Question

Quizplus · Accepted Answer

All of the choices (A, B, and C) are possible in an Asian option. Asian options differ from standard options in that they are dependent on the average price of the underlying asset over a period of time, as opposed to the price of the underlying asset at expiration. The average price can be calculated in a number of ways, including arithmetic or geometric averaging. The strike price can also be based on the average price over the specified period.

An Asian Option Is an Option Where