Foreign exchange risk: Difference between revisions
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imported>Doug Williamson (Expand second example.) |
imported>Doug Williamson m (Link with Deal contingent forward page.) |
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== See also == | == See also == | ||
* [[Deal contingent forward]] | |||
* [[Economic risk]] | * [[Economic risk]] | ||
* [[Exchange controls]] | * [[Exchange controls]] |
Revision as of 10:02, 4 August 2018
The risk of losses or other adverse effects resulting from a change in a foreign exchange rate, or from other unfavourable changes in relation to a foreign currency.
Examples include:
- A final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk)
- A change in asset/liability values in a balance sheet, or profit/loss in an income statement or both (translation risk)
- A change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk).
A more complex area of foreign exchange risk concerns contingent, or pre-transaction risk.
Also known as Currency exposure or Currency risk.