Russian Option

A Russian option is a put contract that gives the holder the right, but not the obligation, to sell their put at the best price the option ever traded at  during the life of the option. Unlike most other options, Russian options have no expiration date, so the life of the option is perpetual and exercised only whenever the holder chooses to (if ever). Russian options are considered a form of exotic option.

Russian Options are also known as "reduced regret options" and are very similar to "lookback options."

Initially proposed by Shepp & Shiryaev in 1993, Russian options are basically a form of the American perpetual put option (XPO). Due to their potential risk if held for long periods of time, exotic options are generally recommended for more experienced investors. In addition, these options rarely trade (if ever), and if they do they would trade over the counter (OTC), and would generally more expensive than other forms of options since the embedded lookback feature is beneficial to the option holder. 

Russian options in many ways are similar to lookback options, which allows the owner the advantage of knowing history when determining when to exercise their option. This type of option reduces uncertainties associated with the timing of market entry and reduces the chances the option will expire worthlessly. Lookback options are expensive to execute, so these advantages come at a sizeable cost.

Shepp & Shiryaev, researchers at AT&T's Bell Labs in the 1990s, proposed a new type of put option in an academic paper published in the journal Euclid in 1993. In the paper, they describe a variation on a put contract where the option buyer receives the maximum discounted price that the option has ever traded at during some time period, which is often indefinitely long, between the purchase time and the exercise time, so that the buyer need look only occasionally at the fluctuations of the underlying market and experience little or no regret that they did not exercise the option at an earlier time. The price for a Russian option can be derived from the option and the (unique) optimal exercise strategy that achieves the optimum value under the assumption that the asset fluctuations follow the Black-Scholes exponential Brownian motion model, which is widely accepted. I

Despite its theoretical elegance, no such regretless option is currently traded in any existing market despite its evident appeal. Its creators called it the Russian option, partly to distinguish it from the American and European style options, where the term of the option is prescribed in advance and where no exact formula for the value has been given