Form of contractual agreement common in the markets for foreign exchange and precious metals. Here, the call option only comes into effect if the underlying has exceeded a certain limit (barrier, knock-out level) (a latent option contract that begins to function as a normal option [knocking in = an instance of striking or colliding] only once a certain price level is reached before expiration). – On the other hand, one speaks of a knock-out option if the underlying has fallen below the barrier. – See barrier option, basis risk, option, path-dependent, sleepy warrant, underwater.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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