ESMA_QA_1194
01/07/2012
Subject Matter
Risk Measurement and Calculation of Global Exposure and Counterparty Risk for UCITS - Hedging strategies
Original question
Can the following strategy be qualified as a hedging strategy as defined in CESR’s guidelines?
A portfolio management practice which only aims to reduce the interest rate risk of a corporate bond portfolio by entering into a short position on bond future contracts (or an interest rate swap) in the same currency and with a similar interest rate duration. Note that in this case the portfolio credit risk would remain un-hedged.
A portfolio management practice which only aims to reduce the interest rate risk of a corporate bond portfolio by entering into a short position on bond future contracts (or an interest rate swap) in the same currency and with a similar interest rate duration. Note that in this case the portfolio credit risk would remain un-hedged.
ESMA Answer
01-07-2012
Original language
[ESMA 34-43-392 UCITS Q&A, section 5, Q&A 1a]
Yes. This strategy could be considered as a hedging arrangement as defined in CESR’s guidelines as it is in line with the example set out in paragraph 33(a) of the guidelines.
Status: Answer Published
Additional Information
Level 1 Regulation
Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC
Topic
UCITS global exposure