Aggregate Risk

Dictionary Says

Definition of 'Aggregate Risk'

The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.

Investopedia Says

Investopedia explains 'Aggregate Risk'

Banks and financial institutions closely monitor aggregate risk in order to minimize their exposure to adverse financial developments - such as a credit crunch or even insolvency - arising at a counterparty or client. This is achieved through position limits that stipulate the maximum dollar amount of open transactions that can be entered into for spot and forward currency contracts at any point in time.

Aggregate risk limits will generally be larger for long-standing counterparties and clients with sound credit ratings, and will be lower for clients who are either new or have lower credit ratings.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Exposure At Default - EAD

    A total value ...
  2. Credit Rating

    An assessment of ...
  3. Position Limit

    The highest ...
  4. Credit Risk

    The risk of loss ...
  5. Settlement Risk

    The risk that ...
  6. Forex - FX

    The market in ...
  7. Authorized Forex Dealer

    Any type of ...
  8. Cash Delivery

    1. The same-day ...
  9. Rollover Rate (Forex)

    The net interest ...
  10. Pip-Squeak Pop

    A slang term ...

Articles Of Interest

  1. Understanding Forex Risk Management

    There's risk in every trade you take, but as long as you can measure risk, you can manage it.
  2. Leverage's "Double-Edged Sword" Need Not Cut Deep

    Learn to cut out losses quickly, leaving profits room to grow.
  3. Using Economic Capital To Determine Risk

    Discover how banks and financial institutions use economic capital to enhance risk management.
  4. Manage Risk With Trailing Stops And Protective Put Options

    Using the right strategy can lower the risk of failure and protect your profits.
  5. An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  6. The Forex Three-Session System

    Market hours for Tokyo, London and New York determine volatility peaks. Find out why.
  7. A Forex Trader's View Of The Aussie/Gold Relationship

    We look at why this relationship exists and how you can use it to produce solid gold returns.
  8. America's Loss Is The Currency Market's Gain

    The Smithsonian Agreement hurt the U.S. in the short-term, but was necessary in furthering real market-driven exchange rates.
  9. Fundamental Speed: The "Duck-And-Jab" Approach To Forex

    By using economic releases in a timely way, buyers can beat the "big players" without endless chart analysis.
  10. The Currency Market Information Edge

    Unique features of the forex market may allow larger players to get a jump on smaller ones.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center