A COMPLEX DERIVATIVE contract that creates or extinguishes an underlying EUROPEAN OPTION as the price of the market reference moves through a specified BARRIER. Four versions of the barrier option are commonly used, including the DOWN AND IN OPTION , DOWN AND OUT OPTION , UP AND IN OPTION , and UP AND OUT OPTION . The fact that the underlying option may be extinguished, or may never be created, means that a barrier option is typically less expensive than an otherwise equivalent European option. Also known as KNOCKIN OPTION, KNOCKOUT OPTION. See also REVERSE BARRIER OPTION.
Black’s Law Online Dictionary
