Barrier Price

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Barrier Price

The price at which a barrier option becomes active or inactive. A knock-in barrier option may not be exercised unless the price of the underlying asset reaches the barrier price, which is stated in the contract. For example, a contract may have a strike price of $35, but it may only be exercised if the spot price of the underlying asset falls below $40 at some point during the life of the option. On the other hand, a knock-out barrier option with a strike price of $35 may expire automatically if the price rises above $40. In both cases, the barrier price is $40.