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Barrier option
An option that is either activated or deactivated when the price of the underlying (inside barrier option) or another stipulated financial variable (outside barrier option) reaches a fixed value (barrier price) prior to maturity.
(1) There are many forms of barrier options, for example those that come to life (knock-in option) or are extinguished (knock-out option) when the barrier price is reached, those that have only one barrier price (single-barrier option), or two barrier prices (double-barrier option) either of which activates the option, either of which deactivates the option, or one activates the option while the other deactivates the option.
(2) A barrier option is a specific type of path-dependent option.
Translations
Synonyms and variations
- Double-barrier option
- Inside barrier option
- Limit option
- Outside barrier option
- Single-barrier option
- Special expiration price option
- Trigger option