Asked by Marco Bianchini on May 25, 2024
Verified
In a perfectly matched hedge of fixed-rate debt using an interest rate swap, the effect of a change in fair value of the derivative on the income statement
A) is always a gain
B) may be a gain or a loss
C) is zero
D) is always a loss
Perfectly Matched Hedge
A hedging strategy that entirely eliminates the risk of a particular position by taking an offsetting position in the market.
Interest Rate Swap
A financial derivative contract in which two parties agree to exchange future interest rate payments, typically one fixed-rate and one variable-rate.
Fair Value
A financial term referring to the estimated market value of an asset, based on current market prices.
- Acquire foundational knowledge in derivatives and hedging tactics, especially in swaps and hedges.
Verified Answer
Learning Objectives
- Acquire foundational knowledge in derivatives and hedging tactics, especially in swaps and hedges.
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