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Gain on interest rate hedge

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Gain on interest rate hedge

  • This topic has 5 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • December 26, 2021 at 1:23 pm #644861
    aadil1234
    Member
    • Topics: 75
    • Replies: 104
    • ☆☆

    Sir is it true that when there is a gain on hedged item than there will be a loss on hedged instrument and vice versa. If it is true or false than why?

    December 26, 2021 at 3:59 pm #644870
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It depends on the instrument being used for the hedging. If we are using interest rate futures then what you say is true (and is the whole point of using futures).

    Have you watched my free lectures on interest rate risk management, because I explain all this in detail?

    December 26, 2021 at 4:16 pm #644871
    aadil1234
    Member
    • Topics: 75
    • Replies: 104
    • ☆☆

    Sir iam talking about interest rate swap.

    December 27, 2021 at 1:00 pm #644895
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Swaps are not done to hedge risk, they are done so as to end up paying less interest than without the swap.

    Again, have you watched the free lectures on this?

    December 27, 2021 at 3:24 pm #644911
    aadil1234
    Member
    • Topics: 75
    • Replies: 104
    • ☆☆

    Sir I watched it a long time ago, actually this question was related to SBR. In SBR there was a question related to Derivatives IFRS-9.

    Thank you Sir for clarifying me on this. I will surely watch it again. 🙂

    December 28, 2021 at 9:42 am #644946
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    If is for Paper SBR then best to ask in the SBR forum 🙂

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    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘Gain on interest rate hedge’ is closed to new replies.

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