Exotic Option Definition
Exotic Option refers to a derivative that is more complex than commonly traded financial instruments. The difference can be caused by the specifics of the underlying asset or by the calculation of how or when the holder receives payment.
For example, a chooser option allows the holder to define whether the option is a put or call at a certain date during the option's life. These instruments are traded over-the-counter (OTC), or are embedded in structured notes.