The Morgan Stanley
ADVANCED OPTION COURSE
EXOTICS AND DERIVATIVES

INDEX OF FIGURES 6

INDEX OF EQUATIONS 6

INDEX OF TABLES 6

BARRIER OPTIONS 7

DELAYED AND PARTIAL BARRIERS 23

BINARY OPTIONS 25

AVERAGE OPTIONS 29

LOOKBACK OPTIONS 31

COMPOUND OPTIONS 33

OPTIONS ON MULTIPLE INSTRUMENTS 34

PASSPORT OPTION 35

VOLATILITY SWAP 36

FX LINKED NOTES 38

GENERAL ISSUES 40

DESIGNING STRATEGIES -- SOME EXAMPLES 41

THE VOLATILITY SMILE 45

INDEX OF FX OPTIONS AND DERIVATIVE PRODUCTS 53