Net investment hedging ineffectiveness
Posted: 29 Jul 2021, 11:27
Hello all,
Wondering if you have experience with net investment hedges, namely with cases where the net investment is reduced to an amount below the designated hedged amount due to losses on the net investment. In order to determine ineffectiveness in those cases I guess you need to build a new hypothetical derivative for the new (reduced) notional amount and check the cumulative fair value change since the very beginning of the hedge (as if that hypothetical derivative had always been your hedged item). Would you agree? Thanks
Wondering if you have experience with net investment hedges, namely with cases where the net investment is reduced to an amount below the designated hedged amount due to losses on the net investment. In order to determine ineffectiveness in those cases I guess you need to build a new hypothetical derivative for the new (reduced) notional amount and check the cumulative fair value change since the very beginning of the hedge (as if that hypothetical derivative had always been your hedged item). Would you agree? Thanks