Asian Tail

It’s the length of time for clocking the average price of an asset in an Asian option. See, Asian options are structured by averaging the price of an asset over a specific amount of time. An Asian tail is that specific amount of time. It’s the predetermined dates and times that contribute to the mean (average) price of an asset (thus, the tail).

Think of it this way: using a vanilla option (either American or European) would be like measuring your speed only at a particular time during a race. That gives a good idea of what's happening at that moment, but doesn't let you know much about the rest of the race. In an Asian option kind of race, we'd clock your speed over a period of time, and then find the average rate at which you run. The tail would let us know how long to time you to figure out that average.



Find other enlightening terms in Shmoop Finance Genius Bar(f)