AO: Option contract in which the payoff (difference between the purchase price and the exercise price)

is based on the average price of the underlying asset on a specific set of dates over a period and (unlike an American option or European option) not on a single date. These option names, however, refer only to the types of options and not to any geographical area. Also called Asian style option, average option, average price option, average rate option, or average style option. An Asian option (or average value option) is a special type of option contract. For Asian options the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European option and American option, where the payoff of the option contract depends on the price of the underlying instrument at exercise; Asian options are thus one of the basic forms of exotic options. One advantage of Asian options is that these reduce the risk of market manipulation of the underlying instrument at maturity (Kemma & 1990 1077). Another advantage of Asian options involves the relative cost of Asian options compared to European or American options. Because of the averaging feature, Asian options reduce the volatility inherent in the option; therefore, Asian options are typically cheaper than European or American options. This can be an advantage for corporations that are subject to the Financial Accounting Standards Board (2004 FASB) revised Statement No. 123, which required that corporations expense employee stock options.

Definition of 'Asian Option' An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option. Investopedia explains 'Asian Option' This type of option contract is attractive because it tends to cost less than regular American options. An Asian option can protect an investor from the volatility risk that comes with the market. Definition of 'Rollover' A rollover is when you do the following: Reinvest funds from a mature security into a new issue of the same or a similar security. Transfer the holdings of one retirement plan to another without suffering tax consequences. Move a forex position to the following delivery date, in which case the rollover incurs a charge. Investopedia explains 'Rollover' Assuming an option about to expire is favorable to hold, you may decide to buy or sell the later expiring option. Retirement plans may be moved in order to forgo tax consequences when moving from one

company to another. The distribution is reported on IRS Form 1099-R and the rollover contribution is reported on IRS Form 5498. Rollovers may be limited to one per annum for each IRA and the assets are generally made payable to the retirement account holder. The assets must then be deposited to the receiving retirement account within 60 days after the account holder receives the assets. The forex fee arises from the difference in interest rates between the two currencies underlying a transaction. Sometimes investors can earn a credit if they are purchasing the currency with the higher of the two interest rates. Investors are often required to maintain certain margin positions with their brokers to earn a credit from rollover. Definition of 'Look back Option' An exotic option that allows investors to "look back" at the underlying prices occurring over the life of the option and then exercise based on the underlying asset's optimal value. This type of option reduces uncertainties associated with the timing of market entry. Investopedia explains 'Look back Option' There are two types of look back options: 1. Fixed: The option's strike price is fixed at purchase. However, the option is not exercised at the market price: in the case of a call, the option holder can look back over the life of the option and choose to exercise at the point when the underlying asset was priced at its highest over the life of the option. In the case of a put, the option can be exercised at the asset's lowest price. The option settles at the selected past market price and against the fixed strike. 2. Floating: The option's strike price is fixed at maturity. For a call, the strike price is fixed at the lowest price reached during the life of the option. For a put, it is fixed at the highest price. The option settles at market and against the floating strike. While look back options are appealing to investors, they can be expensive and are also considered to be quite speculative.