The exposure coefficient b = $\frac { \operatorname { Cov } ( P , S ) } { \operatorname { VAR } ( S ) }$ in the regression P = a + b × S + e is

Question

Quizplus · Accepted Answer

The exposure coefficient $b = \frac{\operatorname{Cov}(P, S)}{\operatorname{VAR}(S)}$ in the regression equation is a measure of how a change in the exchange rate (S) affects the dollar value of a firm's assets (P). This coefficient quantifies the sensitivity of the asset value to changes in the exchange rate.

The Exposure Coefficient B = Cov⁡(P,S)VAR⁡(S)\frac { \operatorname { Cov } ( P , S ) } { \operatorname { VAR } ( S ) }VAR(S)Cov(P,S)​

The Exposure Coefficient B = $\frac { \operatorname { Cov } ( P , S ) } { \operatorname { VAR } ( S ) }$