perfect hedge

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Perfect hedge

A situation in which the profit and loss from the underlying asset and the hedge position are equal.

Perfect Hedge

A hedge on an investment that eliminates the risk on another investment entirely. Perfect hedges are fairly rare as most investments carry at least a little unique risk that cannot be hedged. However, an example of a perfect hedge is a position on option that completely offsets a position in the underlying asset. While perfect hedges eliminate risk, they also greatly reduce or sometimes eliminate the potential for a return.

perfect hedge

A hedge that exactly offsets any gains or losses from an existing investment position. An example of a perfect hedge is the short sale of an owned security in order to lock in an existing profit and transfer it to a subsequent tax year. Because very few hedges are perfect, most of them operate merely to offset a portion of losses or gains. See also risk hedge.
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But if you want longer-lasting flowers, perfect hedges and grass as verdant as a golf course, you'll need to lift your green fingers every so often.
OTC derivatives can have the big advantage of being perfect hedges that minimize hedge accounting problems, Wallace notes, but the Financial Accounting Standards Board will be coming out with new rules for hedge accounting and may well require effectiveness testing for all hedges, with no shortcut for perfect hedges done with OTC derivatives, as the International Accounting Standards Board already does.
We strive to get perfect hedges and at the moment we are right in the middle of our busiest time for hedgecutting.
133, "Accounting for Derivative Instruments and Hedging Activities," on derivatives that do not qualify for "hedge treatment," as well as on derivatives that do qualify but are in part ineffective because they are not perfect hedges, we focus on the long-term economic effectiveness of those instruments relative to the underlying hedged item and isolate the effects of interest rate volatility, changing credit spreads and changes in our stock price on the fair value of such instruments during the period.
The whole garden is walled by perfect hedges of Yew topped at intervals by topiary lollipop spheres of the Yew.
In mortgage banking, there are no perfect hedges,' Haas added, 'and management of earnings volatility is WaMu's most significant risk.
1) Our study shows that an exporting firm can benefit from hedging exchange rate risks even when no perfect hedge is possible.
We define hedging in which [Mathematical Expression Omitted] a perfect hedge and hedging in which [Mathematical Expression Omitted] is volatile an imperfect hedge.