Business and Personal Finance Dictionary

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• CONTINUOUS ACCRUAL CURRENCY OPTION WITH A ONE-TOUCH KNOCK-OUT RANGE
  
  A Derivative Product that accrues nominal value at a constant rate for every day that the index exchange rate stays within the accrual range, then loses all value when the index strikes either side of the knock-out barrier range. (Source: Victor Kremer and William Rhode, "Dollar Gyrations Lead Investors to Exotics," Derivatives Week, 2/3/97.) The term, "Option", is a misnomer, because no one has a true option, not even one as trivial as for an ordinary European Call Option. The product's value is a decreasing function of volatility. Thus, during a period of high anticipated volatility it is possible to buy the product inexpensively. If the index remains within the range, then the percentage payout is relatively large.
  
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