when do we discount

when we are valuing a cap or a foor i get confused… when we are just determining value… like if we are in the money or not do we sill have to discount? like say i buy a 1 yr cap w/ strike of 6% , 1 mil notional… if rate move to 7%… i am up 1% x 1 mil notional… fine but if i want to value this today i need to discount it? back one yr right? this confuses me… i just looked at the problems in the cfa chapter and they never discounted the payoffs…then i just did a schweser and they discounted… i am confused anyone have a better grasp on this

i think the difference is whether you are discounting at maturity or prior to maturity. you want to discount it to the present if you are valuing it prior to maturity.

ahh… i gottcha… so if they tell us to simply value it as off today…meaning prior to maturity, thene you discount it… but if they tell us to value it at experation we dont have to discount it b/c we are at the specific time period alreadyy…