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Hedging for Exchange Rates, Fair Value, Cash Flow, Currency

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Discuss Hedging:

1) Protection against exchange rate fluctuations

2) Fair value hedges

3) Cash flow hedges

4) Foreign currency hedges

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Solution Summary

This solution of 213 words discusses hedging in terms of protection against exchange rate fluctuations, fair value hedges, cash flow hedges and foreign currency hedges.

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ANSWERS

Question 1
Hedges such as forward and swap contracts for one currency to another are undertaken to minimize the exchange rate exposure of both parties.

Question 2
According to International Accounting Standard (IAS) 39 a fair value hedge is "a hedge of the exposure to changes in the fair value of a recognised ...

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