Investopedia

Continue to Site »

Rebate Barrier Option

Filed Under » , ,
Dictionary Says

Definition of 'Rebate Barrier Option'

A financial derivative product that will automatically expire if the underlying asset reaches a certain price, at which time the option holder would be refunded a certain portion of any premium paid. A barrier option is a type of exotic option contract that can be exercised only if the underlying asset reaches a predetermined barrier price.

A barrier option can either be "knock-in," where the contract is exercised if the underlying asset rises above, or drops below (depending on terms), the specified barrier price, or "knock-out," where the contract automatically expires if the underlying asset rises above, or drops below, the barrier price.

Investopedia Says

Investopedia explains 'Rebate Barrier Option'

Options contracts give the holder the right, but not the obligation, to buy or sell a financial asset at an agreed-upon price at, or before, a certain specified date in the future. A rebate barrier option is a knock-out option that provides a refund in the event the knock-out occurs. Since the rebate diminishes the option writer's profits, this type of exotic option is not common.

Articles Of Interest

  1.

    Exotic Options: A Getaway From Ordinary Trading

    These unusual investment vehicles can reignite your interest in trading.

  2. Getting Started In Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.

  3. Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  4. A User's Guide To Warrants

    These investment vehicles are relatively uncommon in the United States, but they do still appear in U.S. markets.

  5. The ABCs Of Option Volatility

    The mystery of options pricing can often be explained by a look at implied volatility (IV).

  6. What's the difference between a regular option and an exotic option?

    Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options share the idea of having the right to buy or sell an asset in the future, ...

  7. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.

  8. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  9. Build A Baby Berkshire

    Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks.

  10. Cash: A Call Option With No Expiration Date

    Cash is generally regarded as a drag on investment returns, but sometimes it may be preferable to hold a substantial cash amount instead of investing it in other assets. This is because having ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center