Types of Barriers

American

A barrier that is continuously observed throughout the life of the option.

Discrete

A barrier that is observed only at one or several predefined times (as opposed to continuous), typically on observable fixing pages.

Single

Single Barrier - any barrier option with one barrier which, if hit, will Knock-In (Knock-Out) the option. Single barrier options can be further categorised into sub-types:

Out of the money barriers - this means that the option is OTM when the barrier is hit.

In the money barriers - sometimes called reverse barrier options. These are options that have positive intrinsic value (are ITM) when the barrier is hit.

Double

Double Barrier - any barrier option with two barriers where, if either barrier is hit, will Knock-In (Knock-Out) the option.

Sequential

Any barrier option with more than one barrier where one or more of the barriers can affect the option differently. E.g., an option that can Knock-Out and/or Knock-In. Once knocked out it can never be knocked in. If first knocked in, it can still be knocked out later.

Parisian

A barrier option that requires a number of events to be triggered rather than just one. E.g., a Knock-Out option where the spot exchange rate must trade at or through the barrier for five consecutive days in order to be knocked out.