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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References in periodicals archive ?

He argues that in practice FTRs are not perfect hedges against transmission congestion because in many cases load is not settled against LMPs but against zonal prices.

Financial Transmission Rights: Analysis, Experiences and Prospects

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.

Grow to love it; Regularly tending to your garden chores will enable you to enjoy it more in the summer months ahead

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.

Rock solid on OTC derivatives regs: companies have staked their ground on the negative impact various proposals could have on end users. Now it's up to Congress

Perfect hedges are like perfect humans--they don't exist nor will they ever exist, but they can serve as a benchmark.

If the elevator has a perfect hedge then the effect is no gain or loss on the transaction.

Chapter 5 Fundamentals of futures hedging

We strive to get perfect hedges and at the moment we are right in the middle of our busiest time for hedgecutting.

Gardening: week in erddig

The whole garden is walled by perfect hedges of Yew topped at intervals by topiary lollipop spheres of the Yew.

Week in erddig; Glyn Smith is National Trust head gardener at Erddig Hall, Wrexham

If an interest rate swap contract meets certain criteria and its critical terms match the other conditions of ASC 815, the hedge contract may possibly be a perfect hedge and therefore qualify for adoption of a simplified accounting method (i.e., the "shortcut method").

Companies may use the shortcut method for their perfect hedge programs if certain criteria are met.

Interest Rate Swaps: Simplified Accounting for a Perfect Fair Value Hedge

We define hedging in which [Mathematical Expression Omitted] a perfect hedge and hedging in which [Mathematical Expression Omitted] is volatile an imperfect hedge.