Domestic Payoff: Square Root function. Formula: Hd = SQRT(Sd) T = 1.2 to 2

Foreign Payoff: Square Root function.

This, although not an actual payoff, is one of the very few cases when the domestic and foreign payoffs are identical – the payoff on the domestic side has exactly the same characteristics as its foreign counterpart. This example is included to illustrate that foreign and domestic payoffs very rarely look the same.