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Elements and Performance Criteria

1. Assess hedge financial transaction
   • Assess risk tolerance and appetite, and review current financial position to determine if hedging is required using an additional financial product
   • Analyse hedging instrument options based on limits, organisational product approvals and current exposure assessment
2. Complete hedge transaction
   • Undertake hedge transaction with counterparties in accordance with organisational guidelines, credit and other desk limits
   • Collect hedge transactional details, complete relevant documentation and enter hedge transaction into the organisation’s dealing system
   • Report details of transaction to authorised trade repository where required by regulation
3. Assess adjusted financial position
   • Assess new post-transaction position in line with profit and loss and risk reports, and new market data available
   • Adjust hedge position, based on analysis of new data, if risk remains outside scope of organisational tolerance or market moves
   • Collect additional transactional details, complete relevant documentation and enter new transaction into organisation’s dealing systems

Performance Evidence

Evidence of the ability to:

complete hedge financial transactions and enter into organisational systems

evaluate and adjust financial positions

interpret and comply with organisational trading rules and limits.

Note: If a specific volume or frequency is not stated, then evidence must be provided at least once.

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Knowledge Evidence

To complete the unit requirements safely and effectively, the individual must:

compare and contrast financial risk analysis techniques

analyse and describe financial market reports, including profit and loss reports

describe the key features of organisational requirements relating to financial trading

identify and classify organisational transactions limits

assess the impact of the following key economic features when hedging financial products:

characteristics and impacts of economic and business cycles

monetary and fiscal policies

interest rates, exchange rates and inflation

compare and contrast the range of financial market products available.

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