B.2.3 Example 3

We continue with Example 1, but add on the following new parameters:

Table B-58 Example 3

Contract Type	Value
Barrier type	Single Knock In
Barrier	52 INR/USD
Option Style	Digital
Rebate	20 EUR
Expiration Style	European
Barrier Window Start Date	01-Sep-2003
Barrier Window End Date	01-Nov-2003

If any time during 01-Sep-2003 and 01-Nov-2003, the spot rate touches or crosses 52 INR/SD, this option comes into effect (get knocked in). Now, if on 31-Dec-2003, the spot rate is equal to or greater than 50 INR/USD (the strike price), the seller of the option pays a fixed amount of 500 EUR to Options Bank. If the spot rate is below 50 INR/USD on31-Dec-2003, the option expires worthless.

If the above option never comes into existence because of the spot rate never touching 52 INR/USD between 01-Sep-2003 and 01-Nov-2003, then a rebate amount of 20 EUR are paid to Options Bank by the seller of the option.