A transaction done to offset risks from the variability of cash flow that would otherwise negatively affect profits. For example, an oil importer projects that the price per barrel of oil will decrease in the future, thus reducing his profits. The importer buys put options for $100 that allows him to sell oil at a price of $50 per barrel next month. On the next month, if the price of oil is $40 per barrel, then the importer gains from the change in price. In this transaction, the put option hedges the risks of price variability.
Related information about cash flow hedge:
- Cash flow hedge - Wikipedia, the free encyclopedia
A cash flow hedge is a hedge of the exposure to the variability of cash flow that. is attributable to a particular risk associated with a recognized asset or liability.
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A cash flow hedge is a type of investing strategy set up to protect a person from the risk of a variable cash flow of a specific...
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A cash flow hedge is a hedge derived from cash flows received from two or more financial products. For example, the hedge may be linked to the cash flows ...
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Definition of cash flow hedge: A transaction done to offset risks from the variability of cash flow that would otherwise negatively affect profits. For example, an oil ...
- Cash Flow Hedge & Hedging Derivatives, Derivative WIKI | FINCAD
A Cash Flow Hedge is used when an entity is looking to eliminate or reduce the exposure from changes in the cash flows of a financial asset or liability.
- Issue G20 - FASB FAS 133 Derivatives Implementation
More specifically, a qualifying cash flow hedge shall be accounted for as follows: . ... If (a) the hedging instrument in a cash flow hedge is a purchased option or a ...
- Cash Flow Hedge Examples
Jun 1, 2010 ... Cash Flow Hedge Examples. ... Cash Flow Hedge Example NG NYMEX Forecasted Transaction Transco Z3 January 1, 2008 (inception) 5.9 ...
- DerivActiv.com - ASC 815 Cash Flow Hedge Requirements
A cash flow hedge can be described as a transaction that “locks in a rate or a cash flow.” Cash flow hedges are entered into to achieve certainty when cash flow ...