Rebate Barrier Option

Rebate Barrier Option

A knock-out option that refunds the holder a certain amount of money should the knock-out occur. A knock-out option is an option contract that automatically expires, even before the expiration date, if the underlying asset reaches a certain price that would be disadvantageous to the option writer. If this price is reached for a rebate barrier option, the holder receives a portion of the premium back. Because this reduces the writer's profit, a rebate barrier option is relatively uncommon. See also: Barrier option.