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.

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Definitions:

Insight Learning

A form of problem solving where the solution suddenly comes to us in what might be described as a "flash of insight".

Aha! Experience

A moment of sudden insight or discovery.

Latent Learning

The process of learning that occurs without immediate evidence of understanding or behavior change.

Unconditioned Stimulus

A stimulus that naturally triggers a response without any prior learning or conditioning.