A knock-in option is a latent option contract that begins to function as a normal option (knocks in) only once a certain price level is reached before expiration. Knock-ins are a type of barrier option that are classified as either a down-and-in or an up-and-in. A barrier option is a type of contract in which the payoff depends on the underlying security’s price and whether it hits a certain price within a specified period.
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