Forward Knock Out

Knock Out forward product allows the hedger to make his hedge from a better rate than the forward rate if market does not reach to a predefined Knock Out level. The knock out event triggers when market moves in favor of the hedger, because hedger buys a reverse knock out option and sells a regular knock out option. The difference of Forward Knock Out from normal forward product is its better rate and the Knock Out level.


Although KO Forward offers very advantage rate according to normal forward rate, this product does not guarantee % 100 protection for the hedger. It should be used very carefuly for hedging.


-              Hedger makes the transaction from a better rate than the forward price.

-              Product is formed costless


-              If market touches to Knock Out level through the life of the product hedger losses its protection.

  • Financial Asset                                   : USD/TRY
  • Position at maturity                           : USD/TRY Long
  • Amount                                                 : USD 1,000,000
  • Spot Rate                                             : 1.550
  • Forward Rate                                      : 1.5580
  • Forward Knock Out Rate                  : 1.5400
  • Knock Out Level                                 : 1.6500
  • Advantage according to forward   : 180 ticks
  • Tenor                                                     : 30 days

    The payoff chart of the above example is below,

    Go Pricing

    • DE Pricing Engine
    Derivative Engines Real Time Option Pricing Engines are free for a limited time.
    Sign Up free...

    Sign in        Sign Up

    • What can you do with Derivative Engines ?

    Option Pricing
       - Single Vanilla Option
       - A Portfolio of Vanilla Options
       - Single Barrier Options
       - Binary Options
       More in research...

    Structured Products Pricing
       - Investment Products
       - Hedging Products
       - Trading Products
       More in research...

    Trading Strategy Auto Suggestor
       On research...