Barrier Option

The option to exercise depends on the price of the underlying asset (or spot price) crossing or reaching a given barrier level.
These are path dependent options
Barrier options are always cheaper than a similar vanilla option with no barrier.
Barrier options provide insuarance but with a lower premium than a vanilla option.



Different Types

There are four different types:
Up and Out - Spot price starts below the barrier level and has to move up to be knocked out / cancelled
Down and Out - Spot price starts above the barrier level and has to move down to be knocked out / cancelled
Up and In - Spot price starts below the barrier level and has to move up for the option to become activated / effective
Down and In - Spot price starts above the barrier level and has to move down for the option to become activated / effective




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