Range Accumulation Option or Warrant

A series of binary options with each option covering a short period, typically one day or one week. The payoff of the range accumulation option is the sum of the payoffs of the component binary options. The component options, in turn, payoff when the underlying price or rate falls within a designated range. Range accumulation options may be stand-alone instruments, but they are frequently embedded in notes to create Index Range Notes or LIBOR Range Notes. A dealer will usually try to sell range accumulation options or warrants that pay off over the entire range of possible prices to simplify hedging requirements. Also called Banking On Overall STability (Boost), Expected to Accrue Return on Nominal (EARN) Warrant, Range Accrual Option, Hope for A Market STabilization in a givEn Range (HAMSTER), Index Range Note, LIBOR Range Note. Compare with Binary LIBOR Note, Range Warrant (1). See also Binary Swap, Time Trade.

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