Supershare Option
Computes the price of a supershare option (Hakansson): it pays a fraction of the asset if the price finishes within a band between a lower and an upper bound, and nothing outside it. It was proposed as the building block of a state-contingent mutual fund system, and is an elegant example of a range-dependent option. The price is the asset fraction multiplied by the probability of landing in the band. Enter the spot price, the lower and upper bounds, the rate, the volatility and the term.
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Supershare Option
Computes the price of a supershare option (Hakansson): it pays a fraction of the asset if the price finishes within a band between a lower and an upper bound, and nothing outside it. It was proposed as the building block of a state-contingent mutual fund system, and is an elegant example of a range-dependent option. The price is the asset fraction multiplied by the probability of landing in the band. Enter the spot price, the lower and upper bounds, the rate, the volatility and the term.
Paying only within a price band
The supershare is an elegant, little-known option, proposed by Nils Hakansson in 1976 as a piece of a theoretical fund system. It pays a fraction of the asset only if the price finishes within a band, between a lower and an upper bound. Outside that window, up or down, it pays nothing.
The idea behind it is powerful: by combining supershares covering adjacent bands, you can construct any payoff dependent on the market's final state, like puzzle pieces that cover all possible prices. The price of each supershare is the asset fraction multiplied by the risk-neutral probability of the price landing in that specific band.
Enter the spot price, the lower and upper bounds of the band, the interest rate, the volatility and the term. The tool returns the supershare premium. Note that the wider the band, the more the option approaches simply owning a fraction of the asset, and the narrower, the more it becomes a concentrated bet.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.