Covering: Difference between revisions

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Revision as of 14:19, 23 October 2012

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.

See also