A warrant in which the underlying price/ rate remains above (for a call warrant) or below (for a put warrant) a set barrier price/ rate over the life of the warrant. However, if in a call warrant the underlying price/ rate ends up at or below the barrier level, the barrier is breached and the warrant terminates and becomes worthless. If in a put warrant the underlying price/ rate ends up at or above the barrier, the barrier is breached and the warrant terminates and has no value. In either case, the warrant holder may be entitled to receive a certain amount.

Barrier warrants are issued deep in-the-money, i.e., with exercise prices substantially lower than the current underlying price/ rate.