Currency risk: Difference between revisions

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The risk that arises from a change in currency rates.
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.  


This can take the form of:
#a receipt/payment of more or less home currency than expected when a transaction is settled (transaction risk)
#a change in asset/liability values in a balance sheet, profit /loss in an income statement (translation risk), or
#a change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk). 


A more complex area of risk concerns contingent, or pre-transaction risk.
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.
Also known as Currency exposure or Foreign exchange risk.
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* [[Contingent risk]]
* [[Contingent risk]]
* [[Cross-currency interest rate swap]]
* [[Cross-currency interest rate swap]]
* [[Foreign exchange risk]]
* [[Currency]]
* [[Currency management]]
* [[Devaluation]]
* [[Redenomination risk]]
* [[Pre-transaction risk]]
* [[Transaction exposure]]
* [[Transaction exposure]]
* [[Translation exposure]]
* [[Translation exposure]]


 
[[Category:Manage_risks]]
==Other links==
[http://www.treasurers.org/node/5281 Currency risk, Will Spinney, ACT 2009]
 
[[Category:FX_Risk]]

Latest revision as of 23:31, 20 November 2021

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