exotic option


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Exotic option

Refers to options that are more complex than simple put or call options. For example, a Caput is a call option on a put option. Exotic options trade over-the-counter.

Exotic Option

Any option contract that is not an American or European option. That is, an exotic option contains some provision that makes it different from a straightforward option contract with a strike price, underlying asset, and expiration date. For example, a chooser option allows the holder to decide whether the contract is a call or a put at some point over the contract's life. Also, an Asian option has no set strike price and is calculated as the average of some price listed in the contract and the market value of the underlying asset at the time of exercise. Most exotic options trade over-the-counter because their provisions make them too complex for the regulations of exchanges.

exotic option

An option with a nonstandard feature. A lookback option that allows the owner flexibility in selecting an exercise price is an example of an exotic option. Exotic options are traded in the over-the-counter market.
References in periodicals archive ?
The present study was conducted to explore an exotic option called the "proactive hedging option", which serves to lower the hedging cost passed on to the option holder.
But there's another exotic option, and it's one more rich consumers are making every year: McLaren.
Since the well-known work of Black and Scholes [1] on the classical vanilla European option, there has been concern about the pricing of more complicated exotic options. An exotic option is a derivative which has a payoff structure more complex than commonly traded vanilla options.
mag that she was the one who chose the exotic option to follow Lilly and Lexie.
In order to overcome the lack of historical data on exotic options, we examine the accuracy of hedging a synthetically created exotic option.
No market is as characterized by exotic option structures, volume options, spread options, caplets and floorlets, barriers and swing options as is power.
In addition to adding support for credit derivatives, the software offers expanded coverage of convertible bonds, foreign exchange options and interest rate derivatives, new support for municipal bonds and expanded coverage of exotic option models.
A more exotic option is spending Christmas in the Caribbean with a 17-night jaunt from pounds 2,340.
Handgun optics are no longer an exotic option used by competition shooters and handgun hunters.
The collar option is one kind of exotic option. The payoff of a collar option at expiry time T is min(max([S.sub.T], [K.sub.1]), [K.sub.2]), where [K.sub.2] > [K.sub.1] > 0 and [S.sub.T] is the underlying asset price at expiry time.
We demonstrate that the prices of the exotic option for the CEV process can deviate significantly from the standard option for the lognormal process, even after proper adjustment for volatility difference.
RETAILERS at Ellesmere Port outlet centre Cheshire Oaks have chosen the exotic option to exploit new sales opportunities.