Knock-out Event

This Issue in United States

Knock-out Event

Concept of Knock-out Event in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): A feature added to a vanilla option which will result in, when a certain price (knock-out price) is reached by the underlying, the option either: no longer being exercisable at expiration or automatically being exercised upon the occurrence of such knock-out event, resulting in the payment of the rebate amount. This will have the effect of reducing the option premium, (see barrier option).

Resources

See Also

• Derivatives Contract