The hedge effectiveness criteria prescribed in IAS 39 have made which type of financial instrument much less effective as a potential hedging instrument?

Question

Quizplus · Accepted Answer

The hedge effectiveness criteria in IAS 39 require that for an instrument to be considered an effective hedging instrument, it must be able to offset changes in the value or cash flows of the hedged item. However, options have limited or no capacity to offset changes in the value of the hedged item, making them much less effective as potential hedging instruments.

The Hedge Effectiveness Criteria Prescribed in IAS 39 Have Made