Asian Digital

An Asian digital (ad) is an option where a fixed payout is made under the condition specified in the option's contract. This condition is defined in terms of a European barrier, i.e., the strike. That is, it only matters where the average of the underlying is in relation to the strike on the option's expiry date.

The average of the underlying itself is calculated by taking the underlying on a specific series of dates (or fixings). When determining the fixings, you can also edit the weighting assigned to each date. By default, all dates chosen carry the same weight, that is, 1.

If the option matures in the money (i.e., if the instrument is a call, the average of the underlying is greater than the strike on the expiry date; if it is a put, the average of the underlying is equal to or lower than the strike), the fixed payout is made in the base currency on the option's delivery date.

If it expires out of the money (i.e., if the instrument is a call, the average of the underlying is equal to or less than the strike on the expiry date; if it is a put, the average of the underlying is greater than the strike), no payout is made.

Why enter into an Asian digital?

An Asian digital is simply a bet on the average of the underlying over a series of specific dates compared to the strike. If you win the bet, you receive a predefined amount of money. If you lose the bet, your maximum loss is the premium.