Which of the following statements is most valid?
A) Asian options are useful for hedging risk to markets in Asia.
B) Asian options are usually more expensive than vanilla options because they are exotic.
C) Asian options are useful for hedging exposure to the average price of a security or commodity.
D) Asian options are more sensitive to volatility than vanilla options.

Question

Quizplus · Accepted Answer

Asian options are designed to help manage the risk of the average price of a security or commodity over a period of time. They are often used by investors or companies with exposure to market fluctuations in Asia, but this is not the primary purpose of these options. Option pricing is based on the type of option, not the region it covers, so B is not valid. Compared to vanilla options, Asian options are generally less expensive, which eliminates choice D.

Which of the Following Statements Is Most Valid