Definitions for "knock-out option"
A Knock-Out option is an exotic option, commonly used for commodities and currencies,...
An option the existence of which is conditional upon a pre-set trigger price trading before the option's designated maturity. The option is deemed to exist unless the trigger price is touched before maturity. Legal Risk ( see also International Swap Dealers' Association Agreements) The general potential for loss due to the legal and regulatory interpretation of contracts relating to financial market transactions.
An option that becomes worthless in the event that the underlying commodity or currency crosses a certain price level.