What Is Overhedging

question 54

Multiple Choice

What is overhedging?

• A)Selectively hedging a proportion of an FI's balance sheet position.
• B)Choosing to bear some interest rate risk as well as credit and FX risks.
• C)Reducing the risk to the lowest level possible.
• D)Using more hedge vehicles than is necessary to offset the risk in the cash asset.
• E)Partially hedging the individual assets and liabilities.

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Definitions:

Operating Activities

Transactions and events related to the primary business operations, including the production, sales, and delivery of a company's products and services.

Financing Activities

Transactions that involve raising capital or repaying investors, such as issuing equity or taking on new loans.

Issuing Bonds

The process by which a corporation or government raises funds by selling bonds to investors, with the promise to pay back the principal along with interest on specified dates.

Affects

Impacts or influences an outcome, result, or condition.