Covering: Difference between revisions
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Although used interchangeably with ‘hedging’, covering is strictly speaking, protecting a future cash flow amount whereas hedging refers to the protection of foreign-denominated accounting assets or liabilities against pure translation losses. | Although used interchangeably with ‘hedging’, covering is strictly speaking, protecting a future cash flow amount whereas hedging refers to the protection of foreign-denominated accounting assets or liabilities against pure translation losses. | ||
== See also == | == See also == | ||
* [[Forward market]] | * [[Forward market]] | ||
* [[Hedging]] | * [[Hedging]] | ||
Revision as of 15:32, 17 June 2016
Protecting the cash value of future proceeds usually from an international trade transaction, by buying or selling the proceeds in the forward market.
Although used interchangeably with ‘hedging’, covering is strictly speaking, protecting a future cash flow amount whereas hedging refers to the protection of foreign-denominated accounting assets or liabilities against pure translation losses.
