In evaluating the risk-adjusted asset value of foreign exchange forward contracts,the value of the current exposure can be either positive or zero.

Question

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The current exposure can be positive (i.e. the contract value is in favor of the counterparty) or zero (i.e. the contract value is at market rate). Therefore, the risk-adjusted asset value takes into account the potential losses in case the contract goes against the party.

In Evaluating the Risk-Adjusted Asset Value of Foreign Exchange Forward