In hedge accounting, which of the following exposure should be hedged by foreign currency derivative?
A) Temporal exposure
B) Fair value exposure
C) Derivative exposure
D) Forward contract exposure

Question

Quizplus · Accepted Answer

In hedge accounting, fair value exposure should be hedged by foreign currency derivative. Temporal exposure is the difference in the exchange rate between the transaction date and the settlement date, and it can be managed through operational or balance sheet measures. Derivative exposure and forward contract exposure are not types of currency exposure that need to be hedged, but rather instruments used to hedge exposures.

In Hedge Accounting, Which of the Following Exposure Should Be