An exotic option is
A) Any option written on an unusual or rare underlying asset.
B) An option that is traded only by boutique organizations.
C) Any option that is not a plain vanilla put or call.
D) Any option with very complex payoff patterns.

Question

Quizplus · Accepted Answer

An exotic option refers to any option that is not a plain vanilla put or call. These options generally have more complex payoff patterns and are tailored to meet specific needs of investors. Therefore, option C is the best choice. Option A is incorrect as the underlying asset could be common, but the option itself could have complex characteristics. Option B is also incorrect as there is no restriction on who can trade exotic options. Option D is partially correct but not the best option as exotic options can have simple or complex payoffs, making it less distinct compared to option C.

An Exotic Option Is