Exposure

An asset, a liability, or a net position which might give rise to a loss if there were to be an adverse change in general market prices or rates, or in the credit strength of a counterparty.

For example, a borrowing at the floating market rate of interest exposes the borrower to the risk of a rise in market rates. Because if the market reference rate went up before an interest resetting date, the borrower would have to pay a higher rate of interest on their borrowing.

See also

• Exposure period
• Interest rate risk
• Internal exposure management technique
• Position
• Risk policy