What is 'effectiveness indicator' in SAP FS-BA-PM-HP - Hedge Processes?

effectiveness indicator - Overview

• Component: FS-BA-PM-HP

• Component Name: Hedge Processes

• Description: An indicator that determines how the transactions in a hedge relationship can be posted in hedge accounting. If the effectiveness indicator has the value "ineffective", the hedge relationship must be dissolved, which means dissolution business transactions must be generated. If the effectiveness indicator has the value "effective" or "temporarily ineffective", the transactions are posted, as described in hedge accounting.

effectiveness indicator - Details

• 
  Key Concepts: 
  An effectiveness indicator is a metric used in the FS-BA-PM-HP Hedge Processes component of SAP to measure the success of a hedge transaction. It is calculated by comparing the actual hedge rate to the expected rate, and is expressed as a percentage. 
  
  How to use it: 
  The effectiveness indicator is used to determine whether a hedge transaction has been successful or not. If the indicator is above 100%, then the hedge transaction has been successful, and if it is below 100%, then it has not been successful. 
  
  Tips & Tricks: 
  It is important to monitor the effectiveness indicator regularly in order to ensure that hedge transactions are successful. Additionally, it is important to understand the factors that can affect the effectiveness indicator, such as changes in market conditions or changes in the underlying hedged item. 
  
  Related Information: 
  The effectiveness indicator can be used in conjunction with other metrics, such as the hedge ratio or the hedge cost, to gain a better understanding of the performance of a hedge transaction. Additionally, it can be used to compare different hedge transactions and determine which one is more successful.