Which of the following is not a fair value hedge?
A)An interest rate swap to synthetically convert fixed-rate debt (for which interest rate changes could change the fair value of the debt) into floating-rate debt.
B)A futures contract to hedge changes in the fair value (due to price changes) of aluminum, sugar, or some other type of inventory.
C)An interest rate swap to synthetically convert floating-rate debt (for which interest rate changes could change the cash interest payments) into fixed-rate debt.
D)All of these are fair value hedges.

Question

Quizplus · Accepted Answer

An interest rate swap to convert floating-rate debt into fixed-rate debt is a cash flow hedge, not a fair value hedge, as it aims to stabilize cash flows rather than the fair value of the debt.

Which of the Following Is Not a Fair Value Hedge