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2) A Foofaw pays the value of an underlying stock on the expiration data squared minus 20. Mathematically, if S equals the stock price at
2) A Foofaw pays the value of an underlying stock on the expiration data squared minus 20. Mathematically, if S equals the stock price at expiration, the Foofaw pays 5220. Thus, if the stock price is 5, the Foofaw pays 5120=5. the quantity squared. Note that a Foofaw is an asset, but not an option. Nevertheless, you solve for it the same way as if it were an option. . Today the price of the underlying asset is 30, and the value of the up move is 1.3. The interest rate is 1/19. VVhat is the value of a Foofaw expiring in two periods
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