myz-vgb.ru A Business Encyclopedia

Transaction Exposure

Definition: The Transaction Exposure is a kind of foreign exchange risk involved in the international trade wherein the cross-currency transactions (multiple currencies) are involved. In other words, a risk faced by the company that while dealing in the international trade, the currency exchange rates may change before making the final settlement, is termed as a transaction exposure.

If the Indian exporter has the receivable of $5,00,00, due five months hence, but in the meanwhile the dollar depreciates relative to the rupee, then the exporter will suffer the cash loss. But however, in the case of a payable of the same amount, the exporter gains if the dollar depreciates relative to the rupee.

Thus, once the cross-currency contract has been agreed upon by the firms located in two different countries for the specific amount of goods and money, the contract value may change with the fluctuations in the foreign exchange rates. This risk of change in the exchange rates is called the transaction exposure.

The greater the time gap between the agreement and the final settlement, the higher is the risk associated with the change in the foreign exchange rates. However, the companies could save themselves against the transaction exposure through hedging techniques.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


basis of marketing segmentationcorporate downsizing definitioncredit reserve ratiodifference between induced investment and autonomous investmentwhat is slr ratiomegha definitionelastic and inelastic demand definitionpreference shareholdersjargon meaning in telugufayol's 14 principlesmeaning of sole proprietorshipwhat does autocratic meandefine corporate downsizingmcgregors theory of x and ydifference between horizontal and vertical marketing systemexample of ethnocentrismtheorists of motivationmanpower surpluseconomic trend definitioncrr ratiodefinition of costing systeminternship defliability in hindifactors affecting employee engagementcomponents of expectancy theorydrawing indifference curvessnowball sampling examplesretrenchment in hrmjudgmental sampleexplain business process reengineeringadjourning stageivan pavlov theory summarytreasury bills in india meaningproduct development ansoff matrixhow does consumer expectation affect demand for certain goodsupper limit of neftdefine classicallymaximization linear programmingwhat is a monopolistic marketequity carve out definitionstock poison pillemployees provident fund pension schemeconsumer buying behaviour definitionmonopolistic competition marketwhat is deontology in ethicsexplain demand pull inflationmeaning of percolatedexamples of skimming pricingpsychological barrier in communicationdefinition of modiwage determination economicsscaling techniques in research methodologydefinition of ethnocentricmeaning of suspense in hindipath goal theory leadership stylesnnp at factor costexamples of retrenchmentdefinition of participative managementbreadth of product lineoperant or instrumental conditioningjob analysis process in hrmdefine linear programingstages of capital budgetingwhat is meant by laissez faireblake managerial griddefinition of neo classicismheadcount dashboardbusiness cycle and its phasesemployee poachinginformal communication networkssensitivity analysis for npvwritten down method of depreciationcontribution of employer in pfneft transfer timingsbenevolent leadership stylemeaning of chronicallymeaning of probability in hindidefine stock turnover ratioretrenchment definition in hrm