1422:
79:" in the 2010 Kentucky Derby that "paid a whopping $ 101,284.60" as an example of the controversial high-risk, high-payout exotic bets that were observed by track-watchers since the 1970s in his article about why we use the term exotic for certain types of financial instrument. Palmer compared these horse racing bets to the controversial emerging exotic financial instruments that concerned then-chairman of the
122:
or
European, would be considered a non-exotic or vanilla option. There are two general types of exotic options: path-independent and path-dependent. An option is path-independent if its value depends only on the final price of the underlying instrument. Path-dependent options depend not only on the
207:
in exotic option are determined by the underlying price and ability of the stock to be active or inactive during the trade period, for instance up-and-out option has a high chance of being inactive should the underlying price go beyond the marked barrier. Down-and-in-option is very likely to be
212:
of the stock go below the marked barrier. Up-and-in option is very likely to be active should the underlying price go beyond the marked barrier. One-touch double barrier binary options are path-dependent options in which the existence and payment of the options depend on the movement of the
89:
In 1987, Bankers Trust's Mark
Standish and David Spaughton were in Tokyo on business when "they developed the first commercially used pricing formula for options linked to the average price of crude oil." They called this exotic option the Asian option, because they were in Asia.
310:
The article quotes then-chairman of the
Federal Reserve Paul Volcker in 1980 when he argued, "This is hardly the time to search out for new exotic lending areas or to finance speculative or purely financial activities that have little to do with the performance of the American
39:
they may have several triggers relating to determination of payoff. An exotic option may also include a non-standard underlying instrument, developed for a particular client or for a particular market. Exotic options are more complex than options that trade on an
127:
The payoff at maturity depends not just on the value of the underlying instrument at maturity, but also on its value at several times during the contract's life (for example an Asian option depending on some average, a
123:
final price of the underlying instrument, but also on all the prices leading to the final price. An exotic option could have one or more of the following features:
1259:
1171:
357:
297:
965:
540:
970:
1305:
241:
995:
441:
422:
1127:
863:
509:
483:
460:
1365:
533:
1300:
945:
1447:
86:
in 1980. He argued that just as the exotic wagers survived the media controversy so will the exotic options.
361:
1340:
878:
732:
526:
60:'s 1990 working paper (published 1992, with Eric Reiner) "Exotic Options", with the term based either on
41:
1452:
1196:
1137:
959:
498:
Interest-rate Option Models: Understanding, Analysing and Using Models for Exotic
Interest-rate Options
272:
45:
61:
1241:
1052:
1360:
1355:
1310:
1010:
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955:
838:
679:
611:
434:
The
Options Applications Handbook: Hedging and Speculating Techniques for Professional Investors
1107:
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1000:
80:
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985:
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383:
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932:
873:
808:
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757:
631:
591:
558:
475:
177:
172:
Even products traded actively in the market can have some exotic characteristics, such as
8:
1279:
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813:
136:
which ceases to exist if a certain level is reached or not reached by the underlying, a
1330:
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893:
858:
621:
586:
549:
99:
36:
1335:
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1226:
1112:
898:
694:
505:
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456:
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298:"Why Do We Call Financial Instruments "Exotic"? Because some of them are from Japan"
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Derivative which has features making it more complex than commonly traded products
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129:
57:
1401:
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833:
775:
742:
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641:
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133:
32:
1441:
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1072:
908:
780:
727:
722:
601:
581:
267:
247:
189:
185:
148:
141:
151:, outperformance options, Himalaya options, or other mountain range options.
1201:
975:
903:
883:
843:
712:
684:
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616:
119:
83:
69:
65:
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950:
921:
917:
868:
659:
654:
501:
414:
342:
William
Falloon; David Turner, eds. (1999). "The evolution of a market".
193:
111:
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1042:
1037:
803:
689:
262:
115:
76:
596:
518:
155:
453:
The
Complete Guide to Capital Markets for Quantitative Professionals
1166:
888:
785:
606:
164:
It could involve foreign exchange rates in various ways, such as a
469:
231:
20:
1421:
165:
31:
which has features making it more complex than commonly traded
209:
181:
75:
Journalist Brian Palmer used the "successful $ 1 bet on the
470:
Kyprianou, Andreas E.; Wim
Schoutens; Paul Wilmott (2005).
341:
158:
of the option at expiry, such as a cash or share option.
331:. Working Paper, University of California at Berkeley.
102:
and rely on complex models to attempt to price them.
68:, or due to the use of international terms such as "
408:
154:The manner of settlement may vary depending on the
147:It could depend on more than one index, such as in
492:
291:
289:
161:There could be callability and putability rights.
1439:
431:
322:
472:Exotic Option Pricing and Advanced Levy Models
286:
176:, whose valuation can depend on the price and
534:
411:The Complete Guide to Option Pricing Formulas
295:
213:underlying price through their option life.
56:The term "exotic option" was popularized by
541:
527:
335:
329:Research Program in Finance Working Papers
450:
1366:Power reverse dual-currency note (PRDC)
1306:Constant proportion portfolio insurance
323:Rubinstein, Mark; Reiner, Eric (1995).
242:Constant proportion portfolio insurance
132:depending on the maximum or minimum, a
1440:
548:
522:
1301:Collateralized debt obligation (CDO)
98:Exotic options are often created by
384:"Double Barrier And Exotic Options"
360:. BOB. May 18, 2013. Archived from
358:"Exotic And Double Digital Options"
72:", suggesting the "exotic Orient".
13:
402:
14:
1464:
432:Banks, Erik; Paul Siegel (2007).
140:, peroni options, range options,
1420:
1128:Year-on-year inflation-indexed
376:
350:
316:
188:, the level and volatility of
93:
1:
1138:Zero-coupon inflation-indexed
296:Brian Palmer (14 July 2010).
279:
208:active should the underlying
409:Haug, Espen Gaarder (2007).
386:. BinaryToday. March 9, 2015
51:
7:
1341:Foreign exchange derivative
733:Callable bull/bear contract
216:
199:
105:
44:, and are generally traded
10:
1469:
344:Managing Energy Price Risk
1415:
1374:
1293:
1250:
1242:Stock market index future
1146:
1023:
931:
794:
703:
640:
574:
565:
556:
455:. New York: McGraw-Hill.
35:. Like the more general
1361:Mortgage-backed security
1356:Interest rate derivative
1331:Equity-linked note (ELN)
1316:Credit-linked note (CLN)
451:Kuznetsov, Alex (2006).
1311:Contract for difference
612:Risk-free interest rate
196:between these factors.
1093:Forward Rate Agreement
1321:Credit default option
665:Employee stock option
476:John Wiley & Sons
346:. London: Risk Books.
1448:Mathematical finance
1275:Inflation derivative
1260:Commodity derivative
1232:Single-stock futures
1222:Normal backwardation
1212:Interest rate future
1053:Conditional variance
559:Derivative (finance)
168:or composite option.
1427:Business portal
1280:Property derivative
436:. New York: Wiley.
100:financial engineers
1285:Weather derivative
1270:Freight derivative
1252:Exotic derivatives
1172:Commodities future
859:Intermarket spread
622:Synthetic position
550:Derivatives market
494:Rebonato, Riccardo
180:of the underlying
37:exotic derivatives
1453:Options (finance)
1435:
1434:
1336:Equity derivative
1326:Credit derivative
1294:Other derivatives
1265:Energy derivative
1227:Perpetual futures
1108:Overnight indexed
1058:Constant maturity
1019:
1018:
966:Finite difference
899:Protective option
443:978-0-07-145315-8
424:978-0-07-147734-5
174:convertible bonds
1460:
1425:
1424:
1197:Forwards pricing
971:Garman–Kohlhagen
572:
571:
543:
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520:
519:
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395:
393:
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348:
347:
339:
333:
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325:"Exotic Options"
320:
314:
313:
307:
305:
293:
273:Bermudan options
46:over the counter
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1462:
1461:
1459:
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1457:
1438:
1437:
1436:
1431:
1419:
1411:
1397:Great Recession
1392:Government debt
1370:
1346:Fund derivative
1289:
1246:
1207:Futures pricing
1182:Dividend future
1177:Currency future
1160:
1142:
1015:
991:Put–call parity
927:
914:Vertical spread
849:Diagonal spread
819:Calendar spread
790:
699:
636:
561:
552:
547:
512:
486:
474:. Hoboken, NJ:
463:
444:
425:
405:
403:Further reading
400:
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389:
387:
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377:
367:
365:
364:on 4 March 2014
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287:
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237:Compound option
219:
202:
184:, the issuer's
130:lookback option
108:
96:
81:Federal Reserve
58:Mark Rubinstein
54:
33:vanilla options
17:
12:
11:
5:
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1402:Municipal debt
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1387:Corporate debt
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1187:Forward market
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1120:
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1080:
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1068:Credit default
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891:
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871:
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864:Iron butterfly
861:
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846:
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836:
834:Covered option
831:
826:
821:
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773:
772:Mountain range
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258:Rainbow option
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234:
229:
226:
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218:
215:
201:
198:
190:interest rates
170:
169:
162:
159:
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149:basket options
145:
142:spread options
138:digital option
134:barrier option
107:
104:
95:
92:
53:
50:
15:
9:
6:
4:
3:
2:
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1382:Consumer debt
1380:
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1375:Market issues
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1351:Fund of funds
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1198:
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1192:Forward price
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1129:
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1119:
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1111:
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1103:Interest rate
1101:
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1012:
1009:
1007:
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996:MC Simulation
994:
992:
989:
987:
984:
982:
979:
977:
974:
972:
969:
967:
964:
961:
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956:Black–Scholes
954:
952:
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944:
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919:
915:
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910:
909:Risk reversal
907:
905:
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872:
870:
867:
865:
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857:
855:
852:
850:
847:
845:
842:
840:
839:Credit spread
837:
835:
832:
830:
827:
825:
822:
820:
817:
815:
812:
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805:
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787:
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782:
779:
777:
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771:
769:
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763:Interest rate
761:
759:
758:Forward start
756:
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731:
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721:
719:
716:
714:
711:
710:
708:
706:
702:
696:
693:
691:
688:
686:
685:Option styles
683:
681:
678:
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663:
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648:
647:
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623:
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618:
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613:
610:
608:
605:
603:
602:Open interest
600:
598:
595:
593:
590:
588:
585:
583:
582:Delta neutral
580:
579:
577:
573:
570:
568:
564:
560:
555:
551:
544:
539:
537:
532:
530:
525:
524:
521:
513:
511:0-471-97958-9
507:
503:
499:
495:
491:
487:
485:0-470-01684-1
481:
477:
473:
468:
464:
462:0-07-146829-3
458:
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435:
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353:
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338:
330:
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319:
312:
299:
292:
290:
285:
274:
271:
269:
268:Variance swap
266:
264:
261:
259:
256:
254:
251:
249:
248:Binary option
245:
243:
240:
238:
235:
233:
230:
228:Cash or Share
227:
225:
222:
221:
214:
211:
206:
197:
195:
191:
187:
186:credit rating
183:
179:
175:
167:
163:
160:
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150:
146:
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139:
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126:
125:
124:
121:
117:
113:
103:
101:
91:
87:
85:
82:
78:
73:
71:
67:
63:
62:exotic wagers
59:
49:
47:
43:
38:
34:
30:
26:
25:exotic option
22:
1202:Forward rate
1113:Total return
1001:Real options
904:Ratio spread
884:Naked option
844:Debit spread
704:
675:Fixed income
617:Strike price
500:. New York:
497:
471:
452:
433:
413:. New York:
410:
388:. Retrieved
378:
366:. Retrieved
362:the original
352:
343:
337:
328:
318:
309:
302:. Retrieved
203:
194:correlations
171:
109:
97:
88:
84:Paul Volcker
74:
70:Asian option
66:horse racing
55:
24:
18:
1133:Zero Coupon
1063:Correlation
1011:Vanna–Volga
869:Iron condor
655:Bond option
502:McGraw-Hill
415:McGraw-Hill
304:9 September
110:A straight
94:Development
1442:Categories
1407:Tax policy
1123:Volatility
1033:Amortising
874:Jelly roll
809:Box spread
804:Backspread
796:Strategies
632:Volatility
627:the Greeks
592:Expiration
280:References
263:Timer call
192:, and the
178:volatility
116:put option
77:superfecta
1098:Inflation
1048:Commodity
1006:Trinomial
941:Bachelier
933:Valuation
814:Butterfly
748:Commodore
597:Moneyness
390:April 15,
311:economy."
156:moneyness
118:, either
52:Etymology
1237:Slippage
1167:Contango
1151:Forwards
1118:Variance
1078:Dividend
1073:Currency
986:Margrabe
981:Lattices
960:equation
946:Binomial
894:Strangle
889:Straddle
786:Swaption
768:Lookback
753:Compound
695:Warrants
670:European
650:American
642:Vanillas
607:Pin risk
587:Exercise
496:(1998).
253:Lookback
246:Digital/
217:Examples
205:Barriers
200:Barriers
120:American
106:Features
42:exchange
1156:Futures
776:Rainbow
743:Cliquet
738:Chooser
718:Barrier
705:Exotics
567:Options
368:11 July
300:. Slate
232:Cliquet
224:Barrier
144:, etc.)
21:finance
1217:Margin
1083:Equity
976:Heston
879:Ladder
829:Condor
824:Collar
781:Spread
728:Binary
723:Basket
508:
482:
459:
440:
421:
210:prices
182:equity
166:quanto
29:option
27:is an
1088:Forex
1043:Basis
1038:Asset
1025:Swaps
951:Black
854:Fence
713:Asian
575:Terms
23:, an
922:Bull
918:Bear
660:Call
506:ISBN
480:ISBN
457:ISBN
438:ISBN
419:ISBN
392:2015
370:2013
306:2013
112:call
690:Put
114:or
64:in
19:In
1444::
920:,
680:FX
504:.
478:.
417:.
327:.
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