Guys,
Please, what is the practical difference (apart from recognition) between cash flow and fair value heding?
Thanks,
Gabriel
Cash flow hedging is hedging . . . well . . . cash flow. Maybe a fiixed-for-floating swap when you own a floating-rate bond, so the swap effectively turns it into a fixed-rate bond, eliminating the cash flow risk.
Fair value hedging is hedging . . . you guessed it! . . . fair value. Maybe a forward contract to hedge against the value of your inventory dropping.
You’re welcome.