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A Supershare options is a type of binary option. In a common binary option the payout would be a set dollar amount should the underlying be greater than (or less than) the strike. 

In a Supershare option, there is a lower and upper boundary. If the underlying at expiry is between these boundaries the payoff is:

Payoff = Underlying / LowerBoundary

If the underlying is outside these boundaries the payoff is zero.

supershare option payoff

Formula for Supershare Options

The price of a Supershare option, using the method introduced by Hakansson (1976) can be found by:

 

 

where

 

 ,

where

w = European price of option
S = Spot price of underling asset

XL = Lower strike limit

XH = Upper strike limit b = cost of carry

T = Time to maturity

= Volatility of underling asset

N = Cumulative normal distribution function

 

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