Work out hedge effectiveness instantly with clear inputs, formula shown and shareable results.
The dollar offset test compares the change in hedge value with the change in the hedged exposure. Falling within the accepted band allows hedge accounting; the unmatched portion is recognised in profit as ineffectiveness.
Dollar offset test
Effectiveness = |Δ hedge value / Δ exposure value| × 100
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
It determines whether gains and losses can be deferred in reserves rather than hitting profit immediately.
Basis differences between the hedge and the exposure, notional mismatches and timing differences in cash flows.