The degree to which changes in the fair value of a forward contract offset changes in the fair value or cash flows of a hedged item, describes:

A) hedge exposure.
B) transaction exposure.
C) hedge effectiveness.
D) transaction variability.

Hedge Effectiveness

A measure of the degree to which a hedge transaction reduces the risk of the underlying exposure it was intended to hedge.

Hedge Exposure

A risk management strategy used to reduce or mitigate the risk of adverse price movements in an asset, typically through the use of derivative instruments.

Transaction Exposure

The risk that the value of a company's foreign currency-denominated transactions will be adversely affected by exchange rate fluctuations.