{"id":11,"date":"2020-09-09T07:48:21","date_gmt":"2020-09-09T07:48:21","guid":{"rendered":"https:\/\/bkceconsortium.com\/new\/?page_id=11"},"modified":"2020-09-09T07:48:21","modified_gmt":"2020-09-09T07:48:21","slug":"exotic-finance","status":"publish","type":"page","link":"https:\/\/bkceconsortium.com\/new\/exotic-finance\/","title":{"rendered":"Exotic Finance"},"content":{"rendered":"<p><em>Reference:\u00a0<a href=\"http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative\">http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative<\/a><\/em><\/p>\n<p>An\u00a0<b>exotic derivative<\/b>, in\u00a0<a title=\"Finance\" href=\"http:\/\/en.wikipedia.org\/wiki\/Finance\">finance<\/a>, is a\u00a0<a title=\"Derivative (finance)\" href=\"http:\/\/en.wikipedia.org\/wiki\/Derivative_(finance)\">derivative<\/a>\u00a0which is more complex than commonly traded \u201cvanilla\u201d products,<sup id=\"cite_ref-1\" class=\"reference\"><a href=\"http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative#cite_note-1\">[1]<\/a><\/sup>\u00a0usually relating to determination of payoff. The category may also include derivatives with a non-standard subject matter (i.e.<a title=\"Underlying\" href=\"http:\/\/en.wikipedia.org\/wiki\/Underlying\">underlying<\/a>), developed for a particular client or a particular market.<sup id=\"cite_ref-2\" class=\"reference\"><a href=\"http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative#cite_note-2\">[2]<\/a><\/sup><\/p>\n<p>The term has no precise meaning: the definition is dependent on time and place.\u00a0<a title=\"Interest rate swap\" href=\"http:\/\/en.wikipedia.org\/wiki\/Interest_rate_swap\">Interest rate-<\/a>\u00a0and\u00a0<a title=\"Currency swap\" href=\"http:\/\/en.wikipedia.org\/wiki\/Currency_swap\">currency-swaps<\/a>\u00a0were considered exotic when they first appeared in the 1980s, but are now standard financial tools. Similarly, proprietary products originally developed by\u00a0<a title=\"Merchant bank\" href=\"http:\/\/en.wikipedia.org\/wiki\/Merchant_bank\">merchant banks<\/a>\u00a0or other financial institutions to meet the needs of particular clients may in time diffuse more widely into the market.<sup id=\"cite_ref-3\" class=\"reference\"><a href=\"http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative#cite_note-3\">[3]<\/a><\/sup><\/p>\n<p>As regards\u00a0<a class=\"mw-redirect\" title=\"List of finance topics\" href=\"http:\/\/en.wikipedia.org\/wiki\/List_of_finance_topics#Derivatives_pricing\">valuation<\/a>, given their complexity, exotic derivatives are usually\u00a0<a title=\"Financial modeling\" href=\"http:\/\/en.wikipedia.org\/wiki\/Financial_modeling#Quantitative_finance\">modelled<\/a>\u00a0using specialized\u00a0<a title=\"Monte Carlo methods in finance\" href=\"http:\/\/en.wikipedia.org\/wiki\/Monte_Carlo_methods_in_finance\">simulation-<\/a>\u00a0or\u00a0<a title=\"Lattice model (finance)\" href=\"http:\/\/en.wikipedia.org\/wiki\/Lattice_model_(finance)\">lattice-based<\/a>\u00a0techniques. Often, it is possible, to \u201cmanufacture\u201d the exotic derivative out of standard derivatives.<sup id=\"cite_ref-4\" class=\"reference\"><a href=\"http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative#cite_note-4\">[4]<\/a><\/sup>\u00a0(For example, a<a title=\"Barrier option\" href=\"http:\/\/en.wikipedia.org\/wiki\/Barrier_option\">knockout call<\/a>\u00a0can be \u201cmanufactured\u201d out of standard options; see\u00a0<a title=\"Barrier option\" href=\"http:\/\/en.wikipedia.org\/wiki\/Barrier_option#Valuation\">Barrier option#Valuation<\/a>.) This latter approach may then be preferred, and also allows for a benchmark against which the more specialized models may be verified.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Reference:\u00a0http:\/\/en.wikipedia.org\/wiki\/Exotic_derivative An\u00a0exotic derivative, in\u00a0finance, is a\u00a0derivative\u00a0which is more complex than commonly traded \u201cvanilla\u201d products,[1]\u00a0usually relating to determination of payoff. The category may also include derivatives with a non-standard subject matter (i.e.underlying), developed for a particular client or a particular market.[2] The term has no precise meaning: the definition is dependent on time and place.\u00a0Interest rate-\u00a0and\u00a0currency-swaps\u00a0were [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-11","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/pages\/11","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/comments?post=11"}],"version-history":[{"count":1,"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/pages\/11\/revisions"}],"predecessor-version":[{"id":12,"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/pages\/11\/revisions\/12"}],"wp:attachment":[{"href":"https:\/\/bkceconsortium.com\/new\/wp-json\/wp\/v2\/media?parent=11"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}