In which of the following activities is hedge accounting prohibited?
A)hedging an overall portfolio as opposed to an individual transaction
B)using short calls to protect a long asset
C)using long puts to protect an asset
D)hedging a long position with a short futures
E)hedging a swap with a swaption

Question

Quizplus · Accepted Answer

Hedge accounting is prohibited for hedging an overall portfolio as opposed to an individual transaction because hedge accounting standards typically require a clear link between the hedging instrument and the specific assets or liabilities being hedged. Hedging an overall portfolio does not meet the specificity required for hedge accounting.

In Which of the Following Activities Is Hedge Accounting Prohibited