225 is the Price of asset at initiation the forward price is 235. risk free rate is 4.44%
at expiration, price of asset is 200.
I understand that at expiration on the short side the value of forward is 35; so you either keep your asset realize loss of 25 and the contract settlement has you receive 35 so overall you are up 10. Or you just sell your asset for 235 and still gain 10 overall.
The lonfg side, i dont get it => value of forward is -35 (loss) and what you do you either obligated to buy an asset worth 200 for 235 or you the short just keeps his asset and you pay him the forward value of 35 so overall your loss is 35.
In the book it says that your loss is only 10 as you realize a gain on the asset when it falls to 200. I dont get it since you never owned the asset and how is that so? I understand the zero sum game thing that what the short gains or loses you basically are the opposite but when trying to reason it through im not understanding it.
If someone could clarify this to me that would be pretty awesome.