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August 8, 2020
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Limit Option

August 8, 2020

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Another name for barrier option. By definition, it is an exotic option whose payoff depends on whether the underlying asset price reaches a specified threshold (a predetermined knock-in or knock-out price) or not. A knock-in option comes into existence only when the underlying asset reaches the threshold (the barrier). To the contrary, knock-out options cease to exist if the asset price reaches or breaches the barrier.

The stoption is alternatively known as a limit option.

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