An option contract providing for an income structure different from standard European call and put options is known as "exotic option". Exotic options are traded in over-the-counter derivative markets. They are to be better than standard options suited to the needs of an investor, who wishes to protect himself against undesirable changes in prices of underlying financial instruments or - on the contrary - to earn on future change by taking certain position. Such trading began some 30 years ago. Nowadays it accounts for 5-10% of the total derivative transactions.

Searching for reasons of exotic options market development the following should be stressed:

• an increasing capability of financial institutions to create complex exotic derivatives resulting from development of derivative valuation and hedging strategies;
• lower costs of exotic instruments against the structures of linearly combined market options;
• greater flexibility of exotic options and better adjustment to individual needs of an investor in comparison with options;
• an enhanced knowledge of users applying derivatives, who manage risk of enterprises and investment funds, and who, comprehending the complexity of the risk profile related to their positions, have insisted on the development of new solutions;
• an increasing competitiveness in the financial institutions market in the 90's when potential customers were fought for with complex exotic instruments;
• high yield on the instruments in case of apt expectations of the market developments.

Being unable to base the classification on traditional criteria one needs to use other features of exotic instruments. Considering those most important we obtain six major groups of exotic options: single, elastic, complex, non-linear, correlation and conditional options.