A barrier option in which the barrier is set in the money, rather than out of the-money. This means the option either knock in or knock out when it is in-the-money, depending on its type (up-and-in, down-and-in, up-and-out, and up-and-in). In this sense, reverse barrier options have a discontinuous payoff profile. If a knock-out barrier is breached, the maximum intrinsic value would be wiped out. If the barrier level is above the strike, for a call option, or below it for a put option, then the barrier option is reversed. Otherwise, it is a standard barrier option.
Derivatives
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