Risk glossary

 

Average options (APO)

Average rate option or average price option (APO) – a form of Asian option whose payoff is linked to the average value of the underlying asset over a specified period of time. Although somewhat more complex to price relative to traditional European or American option structures, average rate options are popular since they provide a price hedge that better matches price exposures that are based on daily averages, such as purchase/consumption of energy on a daily basis. Also referred to as an APO.

* see Asian option

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