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.

 

Keywords: currency hedging, currency management, fair value.

Currency management guide