Fed Draws Up Code For Barrier Options

TRADING PRACTICE

NEW YORK--A code of best practice for the use of barrier options has been drawn up by a special working group of the US Federal Reserve. It was released on February 17.

The code was drawn up in response to the increasing popularity of barrier options in the foreign exchange markets and their ability to be manipulated. Barrier options are options that either begin or cease to exist when a specific level in the spot or forward market is reached.

One problem with barrier options has been the

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