A cliquet option or ratchet option is an exotic option consisting of a series of consecutive forward start options.[1] The first is active immediately. The second becomes active when the first expires, etc. Each option is struck at-the-money when it becomes active.[2]
A cliquet is, therefore, a series of at-the-money options but where the total premium is determined in advance. A cliquet can be thought of as a series of "pre-purchased" at-the-money options. The payout on each option can either be paid at the final maturity, or at the end of each reset period.
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