An 'Asian' option is:
A) a 'path-dependent' option
B) is exercised at expiry if the average spot rate over the period is lower than the exercise exchange rate
C) an 'average strike' option
D) any of the given answers

Question

Quizplus · Accepted Answer

An 'Asian' option is indeed a path-dependent option because its payoff depends on the average price of the underlying asset over a certain period, rather than the price at a single point in time. It can be structured as an 'average strike' option, where the strike price is determined by the average price of the underlying asset over the period. Additionally, the conditions for its exercise can vary, including scenarios where it is beneficial if the average spot rate over the period is lower (or higher) than the exercise exchange rate, depending on whether it's a put or call option. Therefore, all the given answers correctly describe aspects of an 'Asian' option.

An 'Asian' Option Is