Esoteric Debt Deep Dive into Complex Debt Instruments
624 reads · Last updated: December 28, 2025
Esoteric debt refers to debt instruments as well as other investments (called esoteric assets) that are structured in a way that few people fully understand. Esoteric debt is complex and can be a product of securitization, or simply arise through a complex financing arrangement. As such, the pricing of these securities can be contested or seem to be known to relatively few market participants. Moreover, the structure of these instruments may lead to deceptively attractive risk/return profiles over other investments when the instruments function properly, but can also lead to illiquidity and pricing problems when markets are disrupted.
