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A group of finance scholars is conducting an analysis of different derivative instruments and assembling a list of factors that drive the development of exotic derivatives for a joint presentation project. During the review process, one scholar notices an error in the prepared slides. Which of the following statements was flagged by the scholar as incorrect?
A
Exotic derivatives are more versatile and can offer more efficient hedging than plain vanilla options.
B
Exotic options can be very profitable for derivatives dealers because they have relatively large bid-offer spreads.
C
Exotic options can be structured to better reflect a firm's view on factors such as interest rates, exchange rates, and commodity prices.
D
Exotic options can be used for tax or regulatory purposes.