I am looking for an explanation for different types/grades of derivatives.

For example we have various asset classes:

  • equities
  • FX (currency)
  • derivatives, etc.

Or different types of secured debts, like:

  1. junior
  2. mezzanine
  3. senior
  4. s-senior.

So my question is about the same things, but for different types of derivatives. Is there any classification of them? I know that, there are plain vanilla derivatives or vanilla as they usually called. For example, - E/A option on equity. Things with options on futures, where underlying asset is FX are more complicated than that. And there are some exotic things like: swaptions or XCCYs.

I know that different financial institution can count that one thing is exotic enough for them, and for other it will be not-exotic enough. As I understand it's usually depends on some in-house metrics. But how does work in ordinary way?

I am looking not for academic answer, but if you have any source/literature, I'll be glad if you share it.

  • 1
    $\begingroup$ I woud start with the lists of derivatives that can be specified with FpML en.wikipedia.org/wiki/FpML / FIX en.wikipedia.org/wiki/Financial_Information_eXchange . $\endgroup$ May 3 '20 at 21:02
  • 1
    $\begingroup$ I have never seen a full classification, but I will stick my neck out and say that there are only 4 types of derivatives: (1) Futures and Forwards (2) Options (3) Swaps (4) "Tranched" securities like mortage securities, CDS etc. $\endgroup$
    – noob2
    May 3 '20 at 21:31
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    $\begingroup$ @DimitriVulis, thank you. To be honest I have read couple of wiki articles of OTC derivatives, but I also don't know for sure, does ISDA provide any classification? $\endgroup$
    – AlexZeDim
    May 3 '20 at 21:39
  • 1
    $\begingroup$ @noob2. well, I know that, especially CDS, but I also never seen full/any classification/stigmatization. Yes, we called it standardised OTC instruments sometimes, like: CDS, XCCY, IRS, OIS, etc. But as you, I never seen any table with explanation/description of something like it. $\endgroup$
    – AlexZeDim
    May 3 '20 at 21:41
  • 1
    $\begingroup$ Most desks have some "permitted products list" (PPL). I'd also look at the definitional booklets isda.org/books#jump-2 that go with the ISDA master agreement en.wikipedia.org/wiki/ISDA_Master_Agreement , but I don't think they're free. $\endgroup$ May 3 '20 at 23:56

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