An exotic derivative is – you guessed it – an exotic member of the larger derivative family. It’s basically any derivative (aka complicated financial product) that is considered out-of-the-box. The label is somewhat time-dependent because a product that is “exotic” now may become commonplace in twenty years. All the other (boring) derivatives are often referred to as “vanilla.” So it’s up to you – will it be vanilla or triple-chocolate macadamia in that investment waffle cone?

Tags: derivative, exotic derivative, financial products, investing, options, vanilla derivative