Currency risk
From ACT Wiki
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, profit/loss in an income statement (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 Foreign exchange risk.
See also
- Contingent risk
- Cross-currency interest rate swap
- Currency management
- Foreign exchange risk
- Transaction exposure
- Translation exposure
