A barrier option (typically a knock-out barrier option) in which the barrier(s) evolves as a step function of time. The option’s value or participation rate declines in steps (gradually) with the passage of time or as a function of the distance it travels beyond the barrier (knock-out price or rate). The option’s value approaches a maximum level equivalent to the value of a vanilla knock-out option.

This option comes in many forms, including: standard step barrier options, partial step barrier options, outside step barrier options, etc.