Transaction Exposure


DEFINITION of '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 to fluctuating exchange rates can lead to major losses for firms.

BREAKING DOWN 'Transaction Exposure'

Often, when a company identifies such exposure to changing exchange rates, it will choose to implement a hedging strategy, using forward rates to lock in an exchange rate and thus eliminate the exposure to the risk.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Overnight Limit

    The number of currency positions a trader can carry over from ...
  4. Rollover Debit

    In foreign exchange trading, a loss caused by an unfavorable ...
  5. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  6. Transaction

    1. An agreement between a buyer and a seller to exchange goods, ...
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