when constructing synthetic commo pos, what should be the Face Value of the bond used to get a short synthettic pos? should it be the the fwd price @maturity or the fwd price @ maturity discounted at the borrowing rate?
I would worry about synthetic commodity positions for Level IV.
Are you talking about cash and carry or reverse cash and carry transactions? Because in the real world synthetic commodity positions are really created by just buying the futures or doing a commodity swap. Commodities have a storage component so replicating is not like synthetic cash or stock where you just buy or sell a bond.