The more complex types of option are regarded as exotic, as opposed to the relatively straightforward European, American and Asian types of option.

Examples include.

Exotic Option s — Binary Options

In finance, an exotic option is a derivative which has features making it more complex than commonly traded products (vanilla options). These products are usually traded over-the-counter (OTC), or are embedded in structured note s.

option contracts that are variations on simple puts and calls or are different products with optionality built into them. Exotic option s are available in various asset classes on which options are available, but are mostly found in the foreign exchange market.

Exotic option

Refers to options that are more complex than simple puts or call options For example, a Caput is a call option on a put option.

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Exotic Option s (finance term)

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An exotic option. It represents a call option on a put option. That is, you purchase the option to buy a put option at a particular price on or before the expiriation date.

Some exotic option s are said to be path dependent. Their terminal value (at exercise or expiration) depends upon the value of the underlier, not only at that time, but also at prior points in time.

Barrier Options Exotic option s that come with embedded trigger points. When these points are crossed, buy/ sell instructions on other options are automatically executed. [Read more. ]

Author: Skip Stamous Filed Under: b Tagged With: B Glossary, barrier options

Related: Endogenous variable Exotic option Refers to options that are more complex than simple puts or call options. For example, a Caput is a call option on a put option. Expansion Phase of the business cycle as it climbs from a trough toward a peak.

These are very exotic option s.

These are exotic option s. Base currency Mainly applies to international equities. Currency in which gains/losses from operating an international portfolio are measured. Base interest rate Related: Benchmark interest rate.

Also see Exotic option. Variable An element in a model. For example, in the model RS&Pt+1 = a + b Tbill t + et, where RS&Pt+1 is the return on the S&P in month t+1 and Tbill is the Tbill return at month t, both RS&P and Tbill are variables because they change through time; i.e.

A digital option is a type of exotic option s which offers a fixed payout if the underlying instrument price exceeds a pre-specified strike price (i.e. digital call option).

Different styles of options include European options, American option s, Bermudan options, Barrier options. Exotic option s and Vanilla options (a vanilla option being any option that is not exotic).

See also: Currency Option. Equity, Equity-Linked Note — ELN, Exchange Rate, Exotic Option. Foreign Currency Effects, Forex — FX, Forward Contract. Option, Quanto Option

Mentioned in

Equity Linked Note — ELN

Exotic Option.

Taleb, Nissim. Dynamic Hedging. Managing Vanilla and Exotic Option s. New York: John Wiley & Sons, 1996.

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Option contracts with trigger points that, when crossed, automatically generate buying or selling of other options. These are exotic option s.

Mainly applies to international equities. Currency in which gains/losses from operating an international portfolio are measured.

Structured Products — Are custom-made, over-the-counter instruments. Among these are: Collateralized Loan Obligations, Collateralized Mortgage Obligation s, Swaps, Unlisted and Exotic Option s, and other Collateralized Obligations. These products are included in the broad definition of derivatives.

Assume an exercise price of $50 and a barrier price of $53. If the stock stays below $53, the call option cannot be exercised. If the stock price reaches the $53 barrier price, the holder then has a call option on the shares at $50. These are exotic option s.

These are very exotic option s. [Harvey] These options operate in the same way as standard options, except that payout or receipt only occurs if certain threshold s in the related reference rate or index are or are not exceeded during the exercise period.