Exotic interest rate option

Okay, so let's pretend that you love candy and your mom is going to give you a piece of candy every week for the next year. But you really like chocolate candies, so you want to make sure that every time you get a candy it's a chocolate one.

So, you ask your mom if you can trade your weekly candy for a chocolate candy. This is kind of like an exotic interest rate option!

An interest rate is how much money you earn or have to pay when you borrow money from a bank. So, an exotic interest rate option is a way for people who lend and borrow money to make special deals to help them get the kind of money they want.

Just like you wanted to make sure you always got a chocolate candy, people who lend and borrow money can use exotic interest rate options to make sure they get the kind of money they want. They might want to make sure they get a certain amount of money or that they get it at a certain time.

It's kind of like a really special agreement between two people that helps them both get what they want when it comes to money.