The degree to which changes in the fair value of a forward contract offset changes in the fair value or cash flows of a hedged item, describes:
A) hedge exposure.
B) transaction exposure.
C) hedge effectiveness.
D) transaction variability.

Question

Quizplus · Accepted Answer

The description provided in the question pertains to hedge effectiveness, which measures the degree to which a hedge eliminates the risk of price or cash flow fluctuations for the hedged item.

The Degree to Which Changes in the Fair Value of a Forward