Exotic Option
A derivative with a payoff that depends on something more complex than the terminal spot price -- typically a path through time, an average, an extreme, a barrier touch, or a basket weighting. Major categories include barrier options (knock-in/knock-out), Asian options (average-based), lookback options (extreme-based), digital options (binary payoffs), and basket options (multi-asset). Exotics are traded over-the-counter between institutional counterparties and are rarely seen by retail investors directly, but they form the building blocks of most structured products sold to retail through banks and brokerages.
Lessons that use this term
Related terms
American Option · Asian Option · Barrier Option · Basket Option · Butterfly Spread · Calendar Spread
Open this term in the app → — no account needed; browse the full glossary while you research.