A hedge that aims to mitigate the risks associated with future cash flows (e.g., the risk of change in foreign currency exchange rate and its impact on the cash flows expected to be generated in the future). Future cash flows may vary due to change in prices or rates used in a given transaction. This type of hedge can be used on both sides of a balance sheet: for assets as well as for liabilities. An example of an existing asset is the expected cash flows from a sale transaction involving raw materials or machinery (from an international supplier). In this case, the cash flows that would be needed to purchase the items could change between the forecast date and the purchase date (price effect), or due to fluctuations in exchange rates (domestic currency vs. foreign currency) (exchange rate effect).

An example of an existing liability is when a firm has a liability denominated in a foreign currency, which comes with a variable interest rate: the cash flows would change in accordance with the changes in the underlying interest rate (price effect) and due to changes in currency price (exchange rate effect).