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Multiple Barrier No Touch Option


A multi-barrier option that comes with a no touch feature. It is a barrier option that has two barriers (and hence the name double barrier option) or more. It is an extension of the single barrier option, where the underlying price/ rate is subject to more than one barrier. For example, a multiple barrier option may have a sequence of barriers B0, B1, and B2. It comes into existence if the underlying price reaches B0 and then B1 and B2.

This barrier option gives the buyer the right, without the obligation, to receive an agreed amount of an asset or cash payment (the payout) if and only if the current price (e.g., a FX spot rate of a specified currency pair) reaches either of the two barriers before or at a specified future date (expiration date).

If the current price/ rate hits none of the two barriers during the life of the option, the payoff will fall due at the option’s expiration date, depending on a market convention. The payoff is typically defined at inception and must be settled as per agreement between the two parties.



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