Hey guys,
For question 1.B:
They ask to indicate whether the payment is made by the long to the short or vice versa.
The answer states that the payment is made by the short to the long because the value is negative.
Shouldn’t this be the other way around?
Compared to Q2.C:
The answer is also negative but it states that this is a gain to the short position.
I am convinced you are right. Came to the forum because I had the same question. If you manage to hear (or reason) otherwise please let us know!!.. however i’m concerned something so obvious wouldn’t be in the errata at this stage!!
It’s an off-market forward contract as indicated in the question, so at inception the short needs to pay to the long in order to establish zero PV upfront.
Thank you ro424. I guess at this stage I’m not reading from the CFAI readings but from KS, and this point was not mentioned (or maybe it was and I missed it, a worrying indicator that my brain is fried at this stage).
Thank you!