An event to which barrier options (or other derivatives such as warrants, swaps, etc.) are subject for payoff determination. It is a situation related to a price or rate level (barrier level) that if attained or reached (or broken through, in either direction), before expiration date, would give rise to a change in the terms of the contract in a manner defined in the event type (upper barrier, lower barrier).
For example, a barrier option would be knocked-in (activated) or knocked-out (deactivated) depending on a specific underlying price/ rate (e.g., interest rate reference), triggering a defined barrier event, i.e., crossing or trading through a set barrier, technically known as an instrike or outstrike price.
