how it is obtained, whether it is a fair value or cash flow hedge and why. Also, specify if the derivative you use as example would be reported in earnings or OCI. Explain how the firm might have a ‘stealth’ or hidden derivative and how you would examine for that. If the company has a stealth derivative explain why it would be a Level III asset and how you would value such a derivative. Mention where this is a very reliable valuation?

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The example I will use is a company that has a large amount of inventory The company is worried about the possibility of the price of the inventory going down so they enter into a derivatives contract ... View the full answer