IRDs are popular with all financial market participants given the need for almost any area of finance to either hedge or speculate on the movement of interest rates.
Linear IRDs are those whose net present values (PVs) are overwhelmingly (although not necessarily entirely) dictated by and undergo changes approximately proportional to the one-to-one movement of the underlying interest rate index.
Examples of non-linear IRDs are; swaptions, interest rate caps and floors and constant maturity swaps (CMSs).
The categorisation of linear and non-linear and vanilla and exotic is not universally acknowledged and a number of products might exist that can be arguably assigned to different categories.
Other products that are generally classed as exotics are power reverse dual currency note (PRDC or Turbo), target redemption note (TARN), CMS steepener [1], Snowball (finance),[1][2] Inverse floater, Strips of Collateralized mortgage obligation, Ratchet caps and floors, and Cross currency swaptions.