Fair value hedging refers to hedging the risk of changes in the fair value of a recognized asset or liability or an unconfirmed firm commitment (or an identifiable part of the asset, liability or firm commitment). This type of change in value results from a specific risk and will affect the company's profit and loss.

Hedging refers to offsetting financial operations taken by investors to prevent adverse price changes. Two sets of buying and selling in opposite directions are usually carried out in the spot market and the futures market. To expand, it means buying or selling commodity futures contracts that are equivalent to the volume of transactions in the spot market but in the opposite direction, with a view to hedging and closing the futures position by selling or buying the same futures contract at a certain time in the future. The profits or losses brought by transactions are used to compensate or offset the actual price risks or benefits caused by price changes in the spot market, so that traders' economic benefits can be stabilized at a certain level.