A combination of three options: a quanto option, a forward starting option, and a floating strike Asian option. More specifically, it is an option in which the underlying asset is denominated in a currency different from that of its payoff, and as such a quanto adjustment is required to take account of the correlation between the exchange rate and the price of the underlying asset. Furthermore, the payoff is based on the average price over a specific period of time, with the averaging period starting at a future date, not at trade date. This option pays the difference between the average and the spot price of the underlying, and hence is dubbed “floating-strike”.
February 19, 2023