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Asian options where first traded in 1987 by Bankers Trust's Tokyo office. This has lead to them being called "Asian" options. Asian options are now especially poplar in the currency and commodity products which have low trading volumes.

An Asian option has its payoff linked to the average price of an asset over a period of time. Due to this Asian options have a lower volatility, rendering them cheaper relative to their European counterparts.

Though there are no known closed form analytical solutions for arithmetic Asian options. Resolution supports three methods for approximating their value:

  • Curran: Calculates the value of a discretely-monitored arithmetic average-rate option using Curran's (1992) approximation.
  • Levy: Calculates an option value for an arithmetic average-rate option using Levy's (1992) approximation.
  • Turnbull-Wakeman: Calculates an option value for an arithmetic average-rate option using the Turnbull-Wakeman (1991) approximation.
For an example of an Asian option pricing please see: Asian Options Explained.



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