What are exotic options?
The OTC markets (Over The Counter) are a constant source of financial innovations that are trying to adapt the characteristics of the different instruments to the specific needs of hedge of different economic agents such as traders. In the case of financial options, one of the most interesting innovations that have emerged in recent years is the exotic type, which can be subdivided into four types:
- Compound options or options on options.
- Options with dependent value on the historical evolution of the underlying asset (path-dependents).
- Conditional Options.
- Options based on several underlying assets.