Down-and-out option

Definition:

Barrier option (or knock-out option) that initially is a plain vanilla option, but which ceases to exist if the underlying security falls to a predetermined level (the barrier price).

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Deficiency Agreement

An agreement that calls on the sponsor or another party to provide the shortfall when cash flow, working capital, or revenues are below agreed levels or are insufficient to meet debt service.

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