This intermediate course covers the more esoteric or exotic options. What makes an option exotic? The key structural characteristics of the various exotic options are defined and explored. This includes digital, barrier, Asian, forward , exchange, rainbow options, correlation options, quantos options and compound options. The applications of these types of options and how they can be combined are examined with specific focus on portfolio management. Different trading strategies are analyzed and yield-enhancing strategies using combinations of various exotic options are identified. The course participant will use specifically designed software to analyze and price different options structures. The behavior of the Greeks on the various exotic options will be explored and the implications for risk managers are highlighted. Various higher order Greek measures will be interpreted and applied to a sophisticated options trading book. Correlation risk in some exotic structures will be identified.

Objectives

By the end of the course, the participant will be able to:

• Describe the key characteristics of a variety of exotic structures including
  • Digitals, barriers, Asians, forwards, exchange, rainbow, correlations quantos and compound
• Explain different portfolio management applications
• Explore trading strategies including yield enhancing strategies and combining various exotic structures
• Price and value the various exotic structures
• Interpret higher order Greeks and apply them to the management of a sophisticated options trading book
• Explore correlation risk among different exotic structures
• Identify Bloomberg functions used by market practitioners

This course is designed for

• Risk managers and auditors needing to understand the more exotic option structures
• Sales persons and support staff for portfolios using exotic option structures