In Order for a Derivative to Be Considered a Hedge

question 119

True/False

In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk exposure associated with changes in fair values or cash flows of the hedged item.

---

Definitions:

Cathode

Negative electrode.

Diode

A two-terminal, solid-state, semiconductor device that allows current flow in one direction only. Acts like a sort of electrical one-way check valve.

Graphical User Interface (GUI)

The menu-driven display screen used in Windows-driven software.

PCs

Personal Computers; electronic devices used for processing data, performing tasks, and accessing the internet, capable of running a wide range of applications.