Asian option – Eng. The Asian Option , sometimes called an option with an average strike price, is based on the idea of paying an amount that is determined based on the average underlying price. The process of calculating the payout amount for Asian options is somewhat more complicated than for American or European options, but it is easier than for other exotic options.
Pricing is the key to understanding how Asian options work. For this, the average price of the underlying (underlying asset) is calculated for a certain period, for example, for six months or a year. Then it is compared with the strike price, and if the option is “in money”, then this amount is paid to the buyer of the option. Otherwise, the option is not executed. Moreover, at the time of purchase of the option, the buyer pays the seller a premium.
Asian options are investment instruments that have a moderate level of risk. Since the process of determining the strike price involves collecting data on the dynamics of the prices of the underlying for a certain period of time, it is easy for an investor to determine whether Asian options are consistent with his investment objectives. If the price of the underlying is more volatile than the conservative investor expected, then this will become completely clear in the process of calculating the strike price, and will allow the investor to look for other investment opportunities. At the same time, investors who specialize in high-risk investments may see inadequate returns on Asian options and continue to search for investments with a potentially higher rate of return.
However, Asian options remain an attractive investment for many private and institutional investors. Possessing what many see as the optimal risk / return ratio, these options are attractive to many investors who want to move a little away from conservative approaches while avoiding accepting high risk.