An Asian Option is a kind of option product where the resolution value is an average, not a specific value at a point in time (which is standard for European options). For example, consider the following two contracts that pays out the price of oil on May 1. That is a European option since the resolution is based on the price of oil on a specific date. In contrast, a contract that pays out the average price of oil in the month of April would be an Asian option.
Choosing whether an Asian or European option structure best fits your hedging needs depends on your individual situation and the nature of the underlying data. If someone is selling on a particular date, then a European option makes more sense–you don’t care about the other price points that are included in the average. If you’re visiting Miami on a specific date in February, you only care about airline prices on that date. Thus a European option on airline ticket prices would make sense. In contrast, if you’re selling or buying continuously, then an Asian option structure might make more sense since you care about all price points equally. So if you’re trying to decide when in February to visit, then you care more about the average price than the price on any one individual date.
Asian options also reduce the intrinsic volatility of the underlying data. For example, consider a contract on the number of COVID-19 cases. The number of COVID-19 cases on a given date are subject to several sources of volatility, including idiosyncratic reporting volatility. In contrast, a weekly or monthly average likely removes a lot of random factors such as day-of-week effects and may be more desirable to those who are merely modeling the trajectory of the virus.