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Languages: English | Bahasa Indonesia
Home | Blog | Define | Videos | Answers | Quiz | Download | Further Reading | Quote | About | Contact |
Barrier Options: Simplified | Comprehensive |
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Barrier Options - DefinitionBarrier Options, also known as Knock-In Options or Knock-Out Options, are exotic options which comes into existence or goes out of existence when certain prices has been reached. Barrier Options - 4 TypesThere are 4 types of Barrier Option features: :: Up-and-In : Underlying asset needs to move up and beyond barrier price for the barrier option to become active. :: Down-and-In : Underlying asset needs to move down and beyond barrier price for the barrier option to become active. Barrier Options - Knock-In OptionsBecomes active only after the underlying asset crosses a certain price, known as the barrier. Barrier Options - Knock-Out OptionsKnock-Out Barrier Options start their life activated. Crossing the barrier terminates the option.
Barrier Options - Double Barrier OptionsDouble Barrier Options or better known as Double Knock-Out Options, have 2 knock-out prices instead of just one, terminating the option even when the underlying asset goes the other way. Advantages of Barrier Options1. Cheaper than conventional options Disadvantages of Barrier Options1. Higher risk of loss due to barrier features. 2. Not publicly traded.
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