# Tag Info

Let me just rephrase in less complex literature. So at $t=0$, you short the expensive side, $S_0$. Use proceed to buy the cheaper side, $P$. You will invest the difference, $(S_0 - P)$ at the risk free rate, where you multiply by $e^{rt}$ due to time value of money, which grows at time $t$. Now at time $t=t$, You close the position, i.e if you have gone ...