What is the purpose of a fair value hedge?

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: What is a cash flow hedge?

A:

Q: In what situations is interest capitalized?

A:

Q: WHAT IS THE ADVANTAGE OF offshore trust?

A: Offshore trust companies can be defined as those companies which help customers with a high net…

Q: What are some of the exempt securities in investor protection and why do we need these securities…

A: Securities are the financial instruments whose holders have the claim over the issuing authority.…

Q: what is money market hedge

A: A money market hedge is a helpful tool that helps firms to maintain the exchange rate risk.

Q: Explain Options to Report Liabilities at Fair Value.

A: Introduction FASB introduces Fair Value Options to report assets and liabilities in fair value,…

Q: What is the effect of a company electing the fair value option with respect to a held-to-maturity…

A: Held-to-maturity security: The debt securities which are held by the investor with an intent to hold…

Q: Explain how alternative investments can act as a hedge against inflation.

A: Alternative Investments:  Stocks, bonds are financial instruments that fall under the category of a…

Q: Describe the accounting for the fair value option.

A: The fair value option allows the business to record its assets and liabilities at their fair value.…

Q: What is reinvestment rate risk?

A: The reinvestment rate risk is the potential decline in the interest income that tends to be a result…

Q: Hedge effectiveness must be documented before a particular hedge qualifies for hedge accounting.…

A: Hedge fund refers to a type of fund that is used to reduce the risk associated with the overall…

Q: Identify the major derivative securities used to hedge against risk.

A: Answer: Usually, the primary aim of derivative securities trading is to hedge risk against the…

Q: Why would anyone want to purchase an F or IF derivative type of investment?

A: Floater tranche(f) It refer to that type of security whose coupon rate copy the movement of index on…

Q: What is the purpose of a cash flow hedge?

A:

Q: For accounting purposes, what type of hedge is the forward contract? a. A cash flow hedge b. A…

A: A forward contract is a contract between the two parties in which both parties agrees to exchange…

Q: (a.) What is the underlying principle of valuation?(b). Why is it critical for us to learn the…

A:

Q: Which tranche of CDOs offers maximum protection to the investment holder ?

A: A collateralized debt obligation also known as CDO is a credit structured finance product which is…

Q: What is the fair value option?

A: Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So,…

Q: What is the fair value option? Explain how use of the fairvalue option reflects application of the…

A: Meaning:

Q: What is market risk?

A: Investments in assets are subject to risks and uncertainty of returns  Risks can be systematic or…

Q: What is a fair value hedge?

A: Fair value hedge: It is a hedging method to manage the risk of changes in the fair value of a…

Q: What is commercial risk?

A: In financial terms, risk is defined as the possibility that the real profits from an outcome or…

Q: Derivative

A: Fair Value hedge Vs. Cash Flow hedge     A hedge is a financial instrument that mitigates risk.…

Q: What is the difference between fair value and market fair value?

A: Fair value refers to the value that represents the worth of a particular item. It is the value that…

Q: Differentiate between Simple and Nonsimple Investments?

A: Simple investment: Simple investment is a type of investment in which the investment sign will…

Q: Define risk-free asset?

A: Risk-free means that anything which does not have any kind of risk associated with it. They are free…

Q: What is counterparty risk?

A: Counterparty risk can exist in trading, credit, investment.

Q: What is marketable securities?

A: Balance sheet has different components. On the basis of liquidity, cash and cash equivalents are the…

Q: es tr ice of an individual security in such a market?

A: Market is efficient that means that information about the security is fully available in market.

Q: Is Bitcoin considered as a financial derivative?

A: Finance is the source for business and is required for the flow of money for any operations.

Q: What is meant by a derivative investment

A: Derivative is a contract which allows its parties to buy/sell an underlying asset as per the…

Q: How should derivatives be used in risk management? What problems can occur?

A: Derivatives are financial instruments that have values derived from other assets like stocks, bonds,…

Q: What is the value of a security? What is the price of a security? How are security value and price…

A: Value of a security : In simple words, the value or the intrinsic value of the security relates to…

Q: Explain how electing the fair value option affects accounting for investments.

A: The fair value option provides the business the option to record the financial instruments at fair…

Q: Should gains and losses on a fair value hedge be recorded as they occur, or should they be recorded…

A: Answer: Fair value hedge: The loss or gain on a fair value hedge should be recorded with the item…