I work in a sell-side bank in derivatives modeling. My work involves modeling and pricing of exotic derivatives and I often wonder who are the buyers of these products.
From my research, I found that its generally hedge funds or entities on the buy-side that want to buy these exotic derivatives. However I don't understand it in depth in the sense that are derivatives used to speculate or take a position, or they are used to hedge a certain position.
For example, I have questions like, is it reasonable to assume that funds that employ systematic strategies wouldn't use exotic or complex derivatives while it would only be the discretionary funds that would use such exotics.
Could someone take an example of a derivative and explain how a buy-side entity would lets say take a position and how using a derivative would make sense for them in that context. Or you could point me towards some online reading material or resource where I can learn about this.