Computation of Effective or Ineffective Portion of Gain or Loss - For Hedging Instruments

For Hedged and Hedging Instruments, which are part of each Hedge definition, the Fair Values as of the first designation date (of the Hedge), From date, and To date is fetched. The cumulative changes in the Fair Values of Hedged and Hedging instruments are computed. Using these cumulative Fair Value changes, the effective and ineffective portions for the Hedging instruments are computed. From the cumulative changes, the net values are also computed.

Note:

It is expected that the effective and ineffective potion of Gain or Loss will be applied only on cash flow Hedges (for downstream counting purposes), though the application computes this for all Hedge types.

For the application to compute the effective or ineffective split for Hedging Instruments that are a part of an active Hedge, the first designation date of the Hedge must be equal to or earlier than the From date or Last accrual date.

To compute the Hedge Ratio, the part of the instrument of the Hedge as of the From date or Last accrual date is considered. The effective and ineffective split is computed only for Hedging Instruments that were part of the Hedge as on the From date. Any change in the composition of the Hedge on a given date is considered (for Hedge Ratio or effective or ineffective calculation) only in the subsequent period.