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Cash hedging

28 August 2008 2,746 views No Comment

Hello,
 
Can anybody help me understand cash hedging?
 
Thanks.
Brenda 
Dear Brenda
Cash flow hedges
Cash flow hedges are used to hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
Examples of cash flow hedges are:
Hedges of floating rate interest-bearing instruments;
Hedges of highly probable forecast transactions.
The effective portion of the gain or loss on the hedging instrument only is recognised directly in equity as hedging reserve while ineffective portion …

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