On this page
Record the conversion
A model borrowing leg repays 48 at expiry. Its current signed value is −48/1.05=−45.714286. The negative sign identifies the borrowing side; the division changes the date.
Use time-zero values together
Current underlying component costs 60. Replication cost is 60−45.714286=14.285714. The shortcut 60−48=12 combines a current stock cost with a future repayment.
Use future values together
At the higher expiry state, the underlying component is 78 and repayment −48, producing 30. At the lower state, 48−48=0. Current cash −45.714286 should not be substituted directly into those expiry equations.
| Calculation | Date-consistent result |
|---|---|
| Today | 60−48/1.05 |
| Higher expiry | 78−48 |
| Lower expiry | 48−48 |
Keep the period rate attached to the debt
The same supplied factor converts this cash leg in both directions. A funding spread, different payment date or different borrowing rate changes the record. No real credit facility is assumed available by this arithmetic.