Editing Exotic option (section)

==Etymology==
The term "exotic option" was popularized by [[Mark Rubinstein]]'s 1990 working paper (published 1992, with Eric Reiner) "Exotic Options", with the term based either on [[2010 Kentucky Derby#Exotic wager|exotic wagers]] in [[horse racing]], or due to the use of international terms such as "[[Asian option]]", suggesting the "exotic Orient".<ref name="Palmer14jul2010" /><ref>{{cite journal |last1=Rubinstein |first1=Mark|last2=Reiner|first2=Eric|title=Exotic Options|journal=Research Program in Finance Working Papers |publisher=Working Paper, University of California at Berkeley |year=1995|url=http://ideas.repec.org/p/ucb/calbrf/rpf-220.html}}</ref>

Journalist Brian Palmer used the "successful $1 bet on the [[superfecta]]" in the 2010 Kentucky Derby that "paid a whopping $101,284.60" as an example of the controversial high-risk, high-payout exotic bets that were observed by track-watchers since the 1970s in his article about why we use the term exotic for certain types of financial instrument. Palmer compared these horse racing bets to the controversial emerging exotic financial instruments that concerned then-chairman of the [[Federal Reserve System|Federal Reserve]] [[Paul Volcker]] in 1980. He argued that just as the exotic wagers survived the media controversy so will the exotic options.<ref name="Palmer14jul2010">{{cite web |title=Why Do We Call Financial Instruments "Exotic"? Because some of them are from Japan |author=Brian Palmer |date=14 July 2010 |publisher=Slate |url=http://www.slate.com/articles/news_and_politics/explainer/2010/07/why_do_we_call_financial_instruments_exotic.html |access-date=9 September 2013 |quote=The article quotes then-chairman of the Federal Reserve Paul Volcker in 1980 when he argued, "This is hardly the time to search out for new exotic lending areas or to finance speculative or purely financial activities that have little to do with the performance of the American economy."}}</ref>

In 1987, Bankers Trust's Mark Standish and David Spaughton were in Tokyo on business when "they developed the first commercially used pricing formula for options linked to the average price of crude oil." They called this exotic option the Asian option, because they were in Asia.<ref name="Falloon1999">{{cite book|editor=William Falloon|editor2=David Turner|year=1999|chapter=The evolution of a market|title=Managing Energy Price Risk|location=London|publisher=Risk Books}}</ref>