
Exotic Options 479
C H A P T E R S U M M A R Y
Regular European and American options, also known as plain
vanilla options, have a single exercise price, and the pay-o
structure is based on the relationship between the exercise
price of the option and the spot price of the underlying asset
on the exercise date.
In exotic options, the pay-o structure can be determined on
the basis of the occurrence of various events during the life of
the option and thus the pay-o is di erent from that of plain
vanilla options.
Exotic options are generally custom-made to suit the needs of
the parties and are non-negotiable.