22-27 Selective hedging that results in an over-hedged position may be regarded as speculative by regulators.

Question

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Regulators typically view over-hedging as speculative because it goes beyond the intended purpose of hedging, which is to eliminate or reduce risk exposure. Instead, over-hedging may be seen as an attempt to profit from market movements, which can introduce additional risks and potentially harm a company's financial stability. As such, selective hedging strategies that result in over-hedging may be scrutinized by regulators and subject to additional reporting or compliance requirements.

22-27 Selective Hedging That Results in an Over-Hedged Position May