The terms transaction exposure and economic exposure are two names for the same foreign exchange risk.

Question

Quizplus · Accepted Answer

Transaction exposure refers to the risk of loss due to changes in exchange rates during the settlement of a transaction, while economic exposure refers to the broader risk of loss arising from changes in exchange rates on a company's future cash flows and overall value. While both types of exposure involve foreign exchange risk, they are distinct concepts with different implications for businesses.

The Terms Transaction Exposure and Economic Exposure Are Two Names