fair value hedge

Definition

A derivative instrument to balance out risk in other investments, to offset potential losses in the fair value of primary assets, liabilities or other investments. They are recorded in earnings, with the total value and significance being directly linked to the primary asset holdings.

Use fair value hedge in a sentence

You should try and figure out a way to use a fair value hedge to limit your liability on the project.

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It was a fair value hedge and I wondered what that meant and my boss let me know that it was not a matter that concerned me at the moment.

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The company had a fair value hedge due to the designated risk that it had of a decline in the value of its inventory and the fear of an uncertain upcoming cash flow.

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