Foreign exchange risk: Difference between revisions
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imported>Doug Williamson (Link with Net investment hedge accounting page.) |
imported>Doug Williamson (Expand second example.) |
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*A final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk) | *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, profit/loss in an income statement (translation 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 change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk). | ||
Revision as of 11:37, 29 July 2017
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.
