Hedges / derivatives

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  • #2745558 Reply

    Is it just me or does everyone hate hedges and derivatives? I feel like I understand the concepts well enough, but when reading MCQs, it takes me at least 1.5 minutes to even read through all the garbage and figure out what they want. That's even after reading the last sentence method. UGH. Hear it isn't an extremely heavily tested area, but geez. Pretty defeating when you look up and you're working through it at 3 minutes. /rant

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    #2745768 Reply

    Use JEs to ease it.
    For example if its a fair value hedge you would book a
    dr. Fv hedge
    cr. Gain on i/s
    Then another gain or a loss (flip the entry) so there is less gain (you lose) etc.
    Same thing with fx transactions always book a payable if you bought something or a receivable if you sold something overseas and just multiply the ap/ar by the change in rate.
    That may took time but the answer is guaranteed.
    Good luck

    #2746170 Reply
    Biff TannenBiff Tannen

    Study the terminology. Hedge and derivatives are hard because they have lots of different terminology (spot rate, buy, sell, put, notional amount, etc). The actual accounting is pretty simple once you get the terminology down.

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