Foreign exchange exposure is classified into three types viz transaction translation and economic exposure transaction exposure deals with actual foreign currency transaction translation exposure deals with the accounting representation and economic exposure deals with little macro level exposure which may be true for the whole industry rather than just the firm under concern. Issues in debates about foreign currency exposure the denomination of liabilities or assets in foreign currency the foreign currency denomination of contracts in international transactions can lead to international currency exposure at the country level with important economic and policy implications when debts are denominated in foreign currency and revenues in domestic currency exchange . Investors have currency exposure because of the transaction risk faced by companies involved in international trade this is the risk that currency exchange rates will change after financial . Foreign exchange risk also known as fx risk exchange rate risk or currency risk is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company the exchange risk arises when there is a risk of appreciation of the base currency in relation to the denominated currency or depreciation of the denominated currency in . Transaction exposure this arises from the effect that exchange rate fluctuations have on a companys obligations to make or receive payments denominated in foreign currency this type of
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