BARRIER OPTION

A kind of option whose payoff is based on whether or not the involved asset has exceeded or reached a predetermined price. Barrier options can be a knock-out, which means that it may turn out worthless in case the underlying asset exceeds a particular price, restraining profits for the holder but restricting losses for the writer. It may also be a knock-in, which means that it has no value until the such time that the underlying asset reaches a particular price.