European option

  

Definition

Type of option that may only be exercised on its expiration date. An American option, in comparison, may be exercised at any time before and up to its expiration date. The payoff of an European option (like that of an American option) depends on the average price of the underlying asset as on a specific date and (unlike that of an Asian option) not over a period. These option names, however, refer only to the types of options and not to any geographical area. Also called European-style option.

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