Question

Difference between transaction exposure economic exposure and translation exposure

Answer 1

Answer:

Explanation:

There is a distinct difference between transaction and translation exposure. ... Translation risk focuses on the change in a foreign-held asset's value based on a change in exchange rate between the home and foreign currencies.

Answer 2

Economic exposure is transaction exposure as well as operating exposure which is related to future cash flows. These cash flows are not realised or contracted for and the exposure is more anticipatory in nature. Economic exposure can arise due to change in future sales, volume, pricing or cost profile.

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