A complex derivative whose value depends on the time the underlying spends relative to (beyond, before, etc) a barrier level. That is, the payoff of an occupation time derivative reflects the time spent by the underlying price in a specific region(s) determined by a barrier. The payoff depends on the terminal value of the underlying and on its occupation time. For example, an option’s nominal could be decreased by 8% for each day the underlying fixing is on the other side of a specific barrier. This can be constructed in a linear or exponential manner.

Examples of occupation time derivatives include Parisian options, cumulative barrier options, soft barrier options, etc.