Description

Asian options have a payoff that is based on the average of the underlying over some period of time (At). The average reduces the impact of big movement in the underlying just before expiration compared to vanilla options. Asian call have a payoff of At-X when At>X and 0 otherwise. Puts have an payoff of X-At when X>At and 0 otherwise. When the asian has some of the averaging points already settled, At becomes a weighted average of the historical settled and the future settling points.