Exotics & Market Structure
Asian, barrier, and digital options reshape vanilla payoffs, and exchanges, ECNs, order books, and clearing explain how all of it trades.
Exotics bend the payoff rule of a vanilla option: Asians average the underlying over a window to dampen manipulation, barriers switch the option on or off when a level trades, and digitals pay a fixed sum if a condition holds. Their prices depend on path features a vanilla quote cannot see, so they are hedged against a full volatility surface and model. The second half of the node covers structure: lit exchanges with central limit order books, ECNs matching anonymous interest, market makers quoting two-sided prices, and clearinghouses novating each trade. This is how every instrument above actually trades.