all-or-nothing option
A type of exotic option which pays either a predetermined amount or nothing, depending on whether it is in the money or not. See digital option.
barrier option
orAn exotic option that is activated or deactivated if the price of the underlying reaches or fails to reach a certain level during its life. See in-barrier option; knock-in option; out-barrier ...
binomial option pricing model
(BOPM).An option pricing model in which the movements in the price or rate of the underlying can only take two values in the next time period for each value ...
binomial tree
The possible changes in asset price or rate used in determining option value in a discrete, jump, or step type of option pricing model. More complicated trinomial or polynomial trees ...
black box syndrome
A general term for the problems that may arise in using complex mathematical and statistical models in finance. For example, it may be difficult to model transparently the impacts of trading on the ...
cacall
Type of compound option where the payoff is on a call option at expiry (cf. caput; exotic option).
caput
(call on a put).Type of compound option where the payoff is on a put option at expiry (cf. cacall; exotic).
custom option
An over-the-counter (OTC) option which has terms is tailored to the requirements of the customer (cf. exchange-traded; exotic option). Also called a dealer option.
dual strike option
Exotic option that offers the holder the better (or worse) of the payoffs from two different underlyings which are themselves options. These may be calls or puts with different strike ...
exchange option
1 An option that allows the holder to exchange one underlying for another.2 See exchange-traded option.
exploding option
An exotic option in which exercise is automatic if the price of the underlying reaches the exercise price.
extreme option
Type of option where the payoff is related to the performance of the underlying over the option period (cf. exotic options). These include lookback options, lookforward options, barrier options, and ...
financial innovation
Changes in financial institutions, financial instruments, or business practices in the financial sector.
floating/floating swap
A common term in the euromarkets for a basis swap. It can also mean one of the many exotic swaps which have embedded options.
knock-in
Two types of barrier option which become activated if the underlying moves through a trigger price or rate in the case of the knock-in, or deactivated in the case of ...
ladder option
An option in which the holder receives a payment every time the value of the underlying passes a given level, irrespective of the final value of the underlying.
