Study Notes: Exotic Options

Topic Progress:

Chapter 15. Exotic Options Study Notes contain 16 pages covering the following learning objectives:

* Define and contrast exotic derivatives and plain vanilla derivatives.
* Describe some of the factors that drive the development of exotic derivative products.
* Explain how any derivative can be converted into a zero-cost product.
* Describe how standard American options can be transformed into nonstandard American options.
* Identify and describe the characteristics and pay-off structure of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, Asian, exchange, and basket options.
* Describe and contrast volatility and variance swaps.
* Explain the basic premise of static option replication and how it can be applied to hedging exotic options.

After reviewing the notes, you will be able to apply what you learned with practice questions.

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