# Ratio Knock-Out Forward

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The Knock-Out can be modelled as continuous throughout the entire period of the hedge, windowed between certain dates, or monitored solely at expiry.

The Ratio Knock-Out Forward is a variation which uses leverage to further improve the ITM Strike.
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### **Payoff Diagram:**

<figure><img src="https://3557203473-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYQ7mk2lqrd7KNTuAuSYT%2Fuploads%2FZKeWPKkTxz6VSIOMoN7a%2FRatio%20KO%20Forward.png?alt=media&#x26;token=0d592574-d73c-45d7-b36c-e8d05d04ef83" alt=""><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.
* Below the Strike, the client will find itself obligated to trade at the Strike level on 200% of the Notional.