Hedge effectiveness is ascertained from:
A) the hedge ratio of the hedging relationship reflects actual quantities and is consistent with the purpose of hedge accounting.
B) there is an economic relationship between the hedging instrument and the hedged item.
C) the effect of credit risk does not dominate the economic relationship hedging instrument and the hedged item.
D) all of the options are correct.

Question

Quizplus · Accepted Answer

All of the options are correct. Hedge effectiveness is determined by ensuring that the hedge ratio reflects actual quantities, the hedge instrument and the hedged item have an economic relationship, and the effect of credit risk is not dominant.

Hedge Effectiveness Is Ascertained From