In the case of Asian option:
A) the option is exercisable on discrete dates before maturity.
B) the option holder chooses as the exercise price any of the asset prices that occurred before the final date.
C) the option payoff is zero if the asset price is on the wrong side of the exercise price and otherwise is a fixed sum.
D) the exercise price is equal to the average of the asset's price during the life of the option.

Question

Quizplus · Accepted Answer

In the case of Asian option, the exercise price is equal to the average of the asset's price during the life of the option. This is known as the arithmetic average of the asset price. The option may be exercisable on discrete dates before maturity, but it is not a defining characteristic of an Asian option. Option holders of Asian options do not choose the exercise price from any of the asset prices that occurred before the final date, as stated in option B. The payoff of an Asian option is based on the difference between the average price and the exercise price, not a fixed sum or zero as stated in option C.

In the Case of Asian Option