The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Exotics enter the mainstream

The derivatives markets have reached a new peak of maturity. Digital and barrier products are commonplace; trades in unusual currency and asset markets are growing in size and volume; and vanilla instruments are being used in ever more sophisticated combinations. Mark Parsley reports.

Evidence from the EMTN market

The bug hunters cash in


"We're not quite back to the heyday of 1993 but the structured asset market is definitely back in a big way." The period this global head of derivatives is fondly recalling was characterized by highly leveraged bets on falling interest rates that culminated in the debacles at Procter & Gamble, Orange County, and elsewhere. Today the bets are less leveraged but they express views on ever more exotic currencies and assets using an ever more complex combination of non-vanilla products. This increasing fondness for the exotic has already taken its toll ­ this time not only on the buyers of the products but also their suppliers.

Range trades in the foreign exchange markets and recently, to a lesser extent, interest rate markets have been one of the most popular products in the last 18 months. In the most straightforward version, the range binary option, investors receive a payout of several times the premium paid but only if the underlying exchange or interest rate remains within a preset range. More exotic variants are often embedded in bonds.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree