Configure Jitsi as localhost only

Is it possible to configure Jitsi with domain localhost (all parts on one machine of course) and to have DNS A/AAAA records as needed?

Or is it mandatory to add DNS record strings into Jitsis/Nginx/Prosody config files?

If you will be the only user of it from the same machine you install it … it is possible, just make sure before installing that there is no localhost virtualhost pre-installed in prosody (some distributions have this and it causes problems in this case).