CHAPTER 11
1. Exotic options are those that have complex payoff as compared to the common European and American options. Exotic options are currently not available in India in option trading and they generally trade over the counter. Exotic derivatives can relate to a foreign currency option or cross currency option or a combination of derivatives.
2. In the currency market, the spot market rate may fluctuate 25,000 – 30,000 times in a single minute (difficult to forecast or control forex rate).
3. The assignment of options implies the settlement for the option buyer. The option buyer exercising his/her option has to be matched with the option seller in the market. In India, this is done on random basis with the help of the computer.
4. Adapted ...
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