What counts as a light exotic?
What counts as a light exotic? I see this mentioned in LinkedIn again and again and its never defined anywhere
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Hey LaNoob, I'm here because nobody responded to this thread after a few days...maybe one of these resources will help you:
No promises, but thought I'd mention a few relevant users that work in the industry: sarah.hoitsma mzsaxena @juked07"
Hope that helps.
Depends on who you ask
I would a bermudan callable is a light exotic, bullet (non-callable) range accruals
Any exotic is an instrument that cannot easily be replicated. Often, these instruments have a correlation element as well.
We can loosely replicate a bermudan option from a strip of europeans, but this fails to consider the correlation between the exercise dates and the sensitivity to the shape of the yield curve
A range accrual can be thought of as portfolio of daily digital options. Digitals do not trade in the market, but we can loosely replicate these with tight vanilla call spreads. Of course, this is not a perfect hedge
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