An exposed asset position

Question

Quizplus · Accepted Answer

An exposed asset position exists when the assets translated at the current rate exceed the liabilities translated at the current rate. In other words, the subsidiary has more assets denominated in a foreign currency than liabilities denominated in that same foreign currency, and so is exposed to FX risk if that currency weakens. A is incorrect because a weakening foreign currency could actually reduce the exposed asset position. B is incorrect because this describes an exposed liability position. C is incorrect because it compares assets translated at different rates, which is not relevant to FX risk.

An Exposed Asset Position