Hedge Effectiveness Tester
Paste the period fair value changes for the hedged item and the hedging instrument. You get cumulative and period-by-period dollar offset, a regression, and a chart that shows the relationship at a glance.
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Fair value changes
Period-on-period changes, same currency and units for both legs. Use a hypothetical derivative for the hedged item where you would in practice.
| Period | Hedged item | Instrument | Offset | Remove |
|---|---|---|---|---|
| P1 | 98.3%Pass | |||
| P2 | 108.6%Pass | |||
| P3 | 94.8%Pass | |||
| P4 | 91.7%Pass | |||
| P5 | 102.1%Pass | |||
| P6 | 93.6%Pass | |||
| P7 | 115.0%Pass | |||
| P8 | 97.8%Pass | |||
| P9 | 75.0%Fail | |||
| P10 | 102.2%Pass | |||
| P11 | 94.0%Pass | |||
| P12 | 102.7%Pass |
Dollar offset (cumulative)
Pass93.5%
11 of 12 periods within 80–125% on their own
Regression
PassR² 0.997
Slope -0.976. Needs R² ≥ 0.8 and slope between -1.25 and -0.8.
Instrument vs hedged item
A perfect hedge sits on the downward diagonal. The shaded wedge is the 80–125% band.
Hollow points are periods outside the band on their own.
- Period observation
- Regression line
- 80–125% band
Method and caveats
Dollar offset is the change in the instrument divided by the change in the hedged item, sign-flipped so a working hedge reads as a positive percentage. The cumulative figure uses the sums since inception, which is less sensitive to small-number noise than any single period.
Regression fits the instrument changes against the hedged item changes by ordinary least squares. A common reading of “highly effective” is an R² of at least 0.8 with a slope between -0.8 and -1.25. Practice also looks at the statistical significance of the slope, which this tool does not report.
IFRS 9 has no 80 to 125% bright line. Under IFRS 9 these measures help evidence the economic relationship and quantify ineffectiveness. Under ASC 815 the band is the usual test of high effectiveness.
This is an illustrative calculator, not accounting advice. Your documented method governs.
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