Variations
Barrier options are sometimes accompanied by a rebate, which is a payoff to the option holder in case of a barrier event. Rebates can either be paid at the time of the event or at expiration.
- A discrete barrier is one for which the barrier event is considered at discrete times, rather than the normal continuous barrier case.
- A Parisian option is a barrier option where the barrier condition applies only once the price of the underlying instrument has spent at least a given period of time on the wrong side of the barrier.
- A turbo warrant is a barrier option namely a knock out call that is initially in the money and with the barrier at the same level as the strike.
Barrier options can have either American, Bermudan or European exercise style.
Read more about this topic: Barrier Option
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