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| "'''Overhedging'''" is a form of speculation.
| | The currency in which financial statements are presented. |
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| It means intentionally hedging an amount GREATER THAN the total related risk exposure, for example by the use of a derivative instrument with a principal amount of 200% of the related risk exposure. The effect of overhedging in this way is to create a new purely speculative position in the derivative instrument.
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| The size of the new speculative position is equal to the excess of the principal amount hedged, over 100%.
| | ==See also== |
| | * [[Functional currency]] |
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| | | [[Category:Accounting,_tax_and_regulation]] |
| For example in this case the size of the new speculative position is 200% - 100% = 100%.
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| In other words equal in size to the original exposure being hedged.
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| The new speculative position is in the opposite direction to the original exposure.
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| == See also ==
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| * [[Hedging]]
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| * [[Underhedging]]
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Latest revision as of 07:07, 2 July 2022
The currency in which financial statements are presented.
See also
