Hedge effectiveness: Difference between revisions
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imported>Doug Williamson (Expand for R-Squared and Slope.) |
imported>Doug Williamson (Update for transition to IFRS 9.) |
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* [[R-Squared]] | * [[R-Squared]] | ||
* [[Slope]] | * [[Slope]] | ||
Latest revision as of 18:20, 3 February 2018
The degree to which changes in the fair value or cash flows of a hedged item that are attributable to the hedged risk are offset by changes in the fair value or cash flows of the related hedging instrument.
In a situation where a hedge is ineffective (or inefficient) the ineffectiveness may arise from:
- Basis risk or basis differences; or
- Differences between the quantum of (i) the hedged item and (ii) the hedging instrument.
Also known as Hedge efficiency.
Metrics for hedge effectiveness include R-Squared and Slope.
