> For the complete documentation index, see [llms.txt](https://eako-capital.gitbook.io/eako-user-guide/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://eako-capital.gitbook.io/eako-user-guide/kiko.md).

# KIKO

Knock-In Forward with Knock-Out

{% hint style="info" %}
The KIKO builds upon the Knock-In Forward by introducing a Knock-Out barrier that enables the client to target an enhanced Strike Rate and/or more attractive Knock-In barrier.

Similarly to the Knock-In Forward, the client has the right but not the obligation to hedge at this rate provided that spot does not trade at or beyond a pre-determined Knock-In Rate. Else, the client is locked into a synthetic forward rate obligation at that strike rate.

In the event that the Knock-Out barrier was triggered, the strategy would be cancelled and the client would be unhedged.

{% endhint %}

### **Payoff Diagram:**

<figure><img src="https://3557203473-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYQ7mk2lqrd7KNTuAuSYT%2Fuploads%2FkUGvU0C33BGfdYHUBAy2%2FRHS%20KIKO.png?alt=media&amp;token=12e2ca43-80c4-483b-afd3-1c3ee6210575" alt="KIKO Knock-In, Knock-Out Payoff Profile"><figcaption></figcaption></figure>

### **Payoff at Expiry:**

At expiry if EURUSD fixes:

* Above the Knock-Out Barrier, the strategy is cancelled and the client will find itself unhedged.
* Above the Strike but below the Knock-Out Barrier, the client is fully protected at the Strike on 100% of the Notional.&#x20;
  * The profit on the derivative will fully net off against the loss on the underlying exposure.
* 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.