Asian & Cliquet FLEX Index Options
Asian and Cliquet FLEX Index options were developed to assist insurance companies with their hedging needs. Many insurance companies issue indexed annuity products where annuitants are provided with upside market exposure. This upside exposure is provided through various types of crediting methods. These crediting methods are nothing more than different types of options embedded within the annuities.
Two popular crediting methods employed by insurance companies are Asian options and Cliquet options. Asian options are also known as averaging options - their settlement price is determined by averaging a pre-set number of closing index values. CBOE offers a specific type of Cliquet option known as the monthly sum cap with a global floor where the payoff is the greater of zero or the sum of the monthly capped returns over the course of a year.
Prior to the listing of Asian and Cliquet options at CBOE, insurance companies hedged these exposures in the over-the-counter (OTC) market. CBOE's Asian & Cliquet FLEX Index Options offer insurance companies the customizable features traditionally associated with the OTC market along with the hallmarks of exchange trading like transparency, centralized clearing, and price discovery.