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R: Data Analysis and Visualization by Ágnes Vidovics-Dancs, Kata Váradi, Tamás Vadász, Ágnes Tuza, Balázs Árpád Szucs, Julia Molnár, Péter Medvegyev, Balázs Márkus, István Margitai, Péter Juhász, Dániel Havran, Gergely Gabler, Barbara Dömötör, Gergely Daróczi, Ádám Banai, Milán Badics, Ferenc Illés, Edina Berlinger, Bater Makhabel, Hrishi V. Mittal, Jaynal Abedin, Brett Lantz, Tony Fischetti

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A glance beyond vanillas

Haug (2007a) comprehensively covers the collection of pricing formulas for around 100 exotic derivatives. The fOptions and fExoticOptions packages are based on this book. Wilmott (2006), Taleb (1997), and DeRosa (2011) describe a lot of practical issues about them.

The first impression could be that there are way too many exotic options. There are many ways of classification. Market makers talk about different generations of exotics, such as first generation, second generation, and so on. Their approach is from a hedging point of view. We will use a slightly different angle, the end-user approach, and classify the options based on their main exotic feature.

Asian type exotics are about the average. It could be an average ...

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