FDM.3:4.3 - Derive and inspect contractual behavior

Work through the relevant events in their applicable order. Apply the terms and state changes to derive the schedule or conditional branches. Keep terms, supplied input values and derived amounts distinguishable enough to inspect.

A simple fixed-payment loan can be modeled in two rows. An instrument with contingent payments may require branches or an executable model. Where an event’s order or date can change the result, inspect that boundary case explicitly. Choose the representation from the behavior the question needs.

Check that the resulting flows agree with the terms under representative conditions. A calculation can be mechanically correct while using the wrong meaning for “amount”, the wrong party or an inappropriate initial state.