EAKO - User Guide
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  • Barrier Options
    • Introduction
    • Types of Barriers
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  • Variations on Barrier Options
    • Double Knock-In
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    • Knock-In European Knock-Out
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    • Performance Knock-In
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    • Partial Double Knock-Out
    • Forward Knock-In
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    • Forward Double Knock-Out
    • Forward Knock-In Knock-Out
    • Knock-Out with Rebate
    • Discrete Knock-Out
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EKI TARF

Target Accrual Redemption Forward; Target Profit Forward with EKI Barrier

PreviousLiability Knock-Out TARFNextPivot TARF

Last updated 2 years ago

The EKI Target Forward features a European style KI barrier 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 Target version.

Payoff Diagram:

Payoff at Expiry:

At expiry if EURUSD fixes:

  • Above the Strike, the client is fully protected at the 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 Strike and above the Knock-In Barrier, the client can participate in the favourable movement and transact at the improved Spot Rate.

  • Below the Knock-In Barrier, the client will find itself obligated to trade at the Strike level on 200% of the Notional.

EKI TARF Payoff Profile - TARF with a European Knock-In Barrier