B.2.8 Example 8

The below example explains the DOKO barrier option introduced instead of Single Knock Out as per Swift 2023 standard.

Market price is lower than barrier

On 01-Mar-2023, Options Bank buys a call option on 1,000 GBP against USD with a strike price of 1.2 GBP. Maturity date is 31-Dec-2023. Premium paid is 100 GBP.

Table B-63 Example for DOKO

Contract Type	Value
Trade date	Wednesday, 01 March 2023
Value date	Wednesday, 01 March, 2023
Maturity date	Sunday, 31 December 2023
Contract Amount	1,000
Contract Currency	GBP
Counter Currency	USD
Option premium	100
Strike price	1.2
Current Spot Rate	1.2
Option Style	BINARY
Barrier type	DOKO ( Down and Out Knock Out )
Expiration style	NA
Barrier	1
Fixed Amount to be paid	NA
Fixed Amount Currency	GBP
Earliest exercise date	NA
Barrier Monitoring Period	01 March to 31 March

Knock Out (KNOT) will fire since barrier is hit.

If at any time during 01-Mar-2023 and 31-Mar-2023, the spot rate goes lower than the barrier (1 GBP/USD), this option gets knocked out and a rebate is paid by the seller of the option to buyer either on the knock out date or on maturity.

During the window period, if the barrier was never hit, the buyer of the option shall have the right to exercise it.

All the cases are applicable for EOD processing and Manual Knock In and Knock Out screen (OTDXKIKO).