Fair Value Hedging
Fair value hedging refers to a hedge accounting concept.
A fair value hedge is a hedge of the exposure to changes in the value of an asset or liability item appearing on a company’s balance sheet.
Currency forward or options can be used as fair value hedges in cases such as hedging the exchange rate of a bond issued in a foreign currency, hedging the currency component of an investment in a portfolio of foreign securities or the cost of purchase of a fixed asset at a date in the future.
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