Hedge effectiveness: Difference between revisions
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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. | 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 <u>ineffective</u> (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. | Also known as Hedge efficiency. | ||
== See also == | == See also == | ||
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* [[Hedge accounting]] | * [[Hedge accounting]] | ||
* [[IAS 39]] | * [[IAS 39]] | ||
Revision as of 11:13, 27 August 2013
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.
