In a perfectly matched hedge of fixed-rate debt using an interest rate swap, the effect of a change in fair value of the derivative on the income statement

A) is always a gain
B) may be a gain or a loss
C) is zero
D) is always a loss

Perfectly Matched Hedge

A hedging strategy that entirely eliminates the risk of a particular position by taking an offsetting position in the market.

Interest Rate Swap

A financial derivative contract in which two parties agree to exchange future interest rate payments, typically one fixed-rate and one variable-rate.

Fair Value

A financial term referring to the estimated market value of an asset, based on current market prices.