A barrier option which has barriers both above and below the current underlying price that widen or narrow in steps (gradually) at a prespecified future date. In essence, double-barrier (double knock-out) options are deactivated (knocked out) when the underlying asset first reaches either the upper or the lower barrier. The step part will have the underlying asset price readjust gradually (according to some knock in or knock-out factor) over the option’s life. For example, a double step barrier call option might have a $100 strike, upper and lower barriers (U = 100, L = 80), and a daily knock-out factor of 0.92.
January 17, 2024
