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.

There are two types of Asian options: Average Price Option (fixed strike), where the strike price is predetermined and the averaging price of the underlying asset is used for payoff calculation; and Average Strike Option (floating strike), where the averaging price of the underlying asset over the duration becomes the strike price.

One advantage of Asian options is that these reduce the risk of market manipulation of the underlying instrument at maturity. 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 revised Statement No. 123, which required that corporations expense employee stock options.

In the 1980s Mark Standish was with the London-based Bankers Trust working on fixed income derivatives and proprietary arbitrage trading. David Spaughton worked as a systems analyst in the financial markets with Bankers Trust since 1984 when the Bank of England first gave licences for banks to do foreign exchange options in the London market. In 1987 Standish and Spaughton were in Tokyo on business when "they developed the first commercially used pricing formula for options linked to the average price of crude oil." They called this exotic option the Asian option because they were in Asia.

There are numerous permutations of Asian option; the most basic are listed below:

The Average ${\displaystyle A}$ may be obtained in many ways. Conventionally, this means an arithmetic average. In the continuous case, this is obtained by

For the case of discrete monitoring (with monitoring at the times ${\displaystyle 0=t_{0},t_{1},t_{2},\dots ,t_{n}=T}$ and ${\displaystyle t_{i}=i\cdot {\frac {T}{n}}}$) we have the average given by

There also exist Asian options with geometric average; in the continuous case, this is given by