ESMA_QA_1195
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 aims to reduce the credit risk of a corporate or government bond portfolio through purchased Credit Default Swaps (CDS). Note that in this case the portfolio interest rate risk would remain un-hedged.
A portfolio management practice which aims to reduce the credit risk of a corporate or government bond portfolio through purchased Credit Default Swaps (CDS). Note that in this case the portfolio interest rate risk would remain un-hedged.
ESMA Answer
01-07-2012
Original language
[ESMA 34-43-392 UCITS Q&A, section 5, Q&A 1b]
Yes, but only if the corporate or government bond and the purchased CDS relate to the same issuer.
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