It is generally least difficult to effectively hedge various types of:

Question

Quizplus · Accepted Answer

Transaction exposure refers to the risk of losses arising from the change in exchange rates between the time a transaction is agreed upon and the time it is settled. This type of exposure is usually the most straightforward and easiest to hedge through various techniques such as forward contracts, futures, options, etc. Translation exposure, on the other hand, refers to the risk of losses arising from translating financial statements or assets/liabilities denominated in foreign currencies into the domestic currency. Economic exposure refers to the risk of losses arising from changes in market conditions, competitive dynamics, and other non-monetary variables that affect a company's operations and cash flows, and is more difficult to hedge since it involves a broader set of risks that cannot be easily controlled by financial instruments.

It Is Generally Least Difficult to Effectively Hedge Various Types