Search Investopedia

Economic Exposure

Filed Under »
Dictionary Says

Definition of 'Economic Exposure'

An exposure to fluctuating exchange rates, which affects a company's earnings, cash flow and foreign investments. The extent to which a company is affected by economic exposure depends on the specific characteristics of the company and its industry.
Investopedia Says

Investopedia explains 'Economic Exposure'

Most large companies attempt to minimize the risk of fluctuating exchange rates by hedging with positions in the forex market. Companies that do a lot of business in many countries, such as import/export companies, are at particular risk for economic exposure.

Related Definitions

  •

    Hedge

    Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures ...
    Read More »

  • Reporting Currency

    The currency which is used for an entity's financial statements. The reporting currency in financial statements and other financial reports are easiest to understand when they are ...
    Read More »

  • Forex - FX

    The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes ...
    Read More »

    • Exchange Rate

      The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the ...
      Read More »

    • Transaction Exposure

      The risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations. Such exposure ...
      Read More »

    • Translation Exposure

      The risk that a company's equities, assets, liabilities or income will change in value as a result of exchange rate changes. This occurs when a firm denominates a portion of its ...
      Read More »

    • Import

      A good or service brought into one country from another. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country compared ...
      Read More »

    • Export

      A function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's ...
      Read More »

    • Overnight Limit

      The number of currency positions a trader can carry over from one trading day until the next. The central bank that regulates the bank or financial institution where the positions are ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions