Equity (index) swap :

A swap in which the total or price return on an equity index, equity basket or single equity is exchanged for a stream of  cashflows based on a short-term interest rate index (or another index).
Equity swaps are a convenient structure for switching into or out of equity markets, particularly for those that prefer to avoid, or are not allowed to use,stock index futures. Like futures, the price of the swap is directly related to the cost of carry, although there may also be tax considerations.

Exotic option :

Any option with a more complicated payout structure than a plain vanilla putor call option. The payout of a plain vanilla  option is simply the difference betweenthe strike price of the option and the spot price of the underlying at the time of exercise. For a European-style option, the exercise time is always the expiry date; other option styles offer greater flexibility. There are a number of ways in which an option payout can differ from that of a plain vanilla. The payout could also be afunction of:

• the difference between a strike and an average rate for the underlying (average options)
• the difference between prices for two different underlyings (differenceoptions, exchange options), the same underlying at different times (highlowoptions)
• the correlation between two or more underlyings (outperformance options,outside barrier options)
• the difference between a strike and the spot rate at some time other than expiry (deferred payout options, shout options, lookback options, cliquet options, ladder options)
• fixed amount (binary options)

Alternatively, or additionally, a payout may be conditional on certain trigger conditions being met. For example, barrier options are activated or nullified if a spot rate falls or rises through a predetermined trigger level. Multiple trigger conditions are possible (as in the case of corridor or mini-premium options).

FAQ|GLOSSARY