Risk glossary

 

Exotic option

Exotic options differ from vanilla options in that they contain additional features affecting the payoff or maturity. Common types include: barrier options, which begin or expire as soon as spot reaches the strike; digitals, which pay a fixed amount if the option is in-the-money; Asian options, where the payoff is based on the average underlying price; and Bermudans, which can only be exercised on predetermined dates.

Click here for articles on exotic options.

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