Hi guys,
Just a simple question on why we have to “unwind” the position or rates in order the determine the value of a contract prior to expiration? On the other hand, there seems to be “unwinding” needed when finding the value of a contract at maturity. Thanks
If you had to close your investment position today, what would be the value you would get? Yes, you need to calculate its value.
The exam asks you to calculate the value of your investment as of today, so you are like “unwinding” your position.
In other words, use the current market data to value future cash flows and, therefore, know the price/value of your investment position right now.