Investments, tenth edition

  Barrier Options 

 Barrier options have payoffs that depend not only on some asset price at option expiration, but 

also on whether the underlying asset price has crossed through some “barrier.” For example, 

a down-and-out option is one type of barrier option that automatically expires worthless if 

and when the stock price falls below some barrier price. Similarly, down-and-in options will 

not provide a payoff unless the stock price  does  fall below some barrier at least once during 

the life of the option. These options also are referred to as knock-out and knock-in options.