EAKO - User Guide
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  • Barrier Options
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EKI Pivot TARF

TARF with both EKI and Pivot Feature

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Last updated 11 months ago

The EKI Pivot TARF is a variation to the standard Pivot TARF, which offers a broader range by introducing EKI barriers. This features a pair of European style KI barriers on the client's OTM obligations. Thus there is only an OTM settlement when the Fixing Rate occurs above / below a given knock-In Barrier Rate; otherwise if the fixing is between the Strike and the KI barrier there are no obligations on either party. The addition of the European barrier will tend to lead to a worse Strike Rate than on a vanilla Pivot version.

Payoff Diagram:

Payoff at Expiry:

At expiry if EURUSD fixes:

  • Above the High EKI Barrier, the client will find itself obligated to sell EUR / buy USD at the (Put) High Strike level on 200% of the Notional.

  • Between the High EKI Barrier and the (Put) High Strike, the client can participate in the favourable movement and transact at the improved Spot Rate.

  • Above the Pivot Level, but below the (Put) High Strike, the client is fully protected and can sell EUR / buy USD at the (Put) High Strike on 100% of the Notional subject to the target condition. Once the target is reached the strategy is cancelled and the client will become unhedged.

  • Below the Pivot Level, but above the (Call) Low Strike, the client is fully protected and can sell USD / buy EUR at the (Call) Low Strike on 100% of the Notional subject to the target condition. Once the target is reached the strategy is cancelled and the client will become unhedged.

  • Between the Low EKI Barrier and the (Call) Low Strike, the client can participate in the favourable movement and transact at the improved Spot Rate.

  • Below the Low EKI Barrier, the client will find itself obligated to sell USD / buy EUR at the (Call) Low Strike level on 200% of the Notional.