ESMA_QA_1195

Status: ✅ Answer Published

Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1195

---

Regulatory Context

Regulation : UCITS

Level 1 Regulation: Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC

Level 2 Regulation: No information available

Level 3 Regulation: No information available

Topic: UCITS global exposure

Subject Matter: Risk Measurement and Calculation of Global Exposure and Counterparty Risk for UCITS - Hedging strategies

---

Question

Submission Date: 01 July 2012

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.

---

ESMA Answer

Answer Date: 01-07-2012

[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.

---

This document was automatically extracted from the ESMA EMIR Q&A database.