Discuss the difference between transaction and economic exposure.
Solution
Transaction exposure: Transaction exposure is related with transactions between business units
that involve foreign currency exchange. It is a short term contractual exposure generally made
with respect to receivables or payables.
Economic exposure is a long term currency exposure and it impacts the value of the firm.
Market. Economic exposure is measured with regard to competitors, future cash flows and value
of the firm..
Discuss the difference between transaction and economic exposure..pdf
1. Discuss the difference between transaction and economic exposure.
Solution
Transaction exposure: Transaction exposure is related with transactions between business units
that involve foreign currency exchange. It is a short term contractual exposure generally made
with respect to receivables or payables.
Economic exposure is a long term currency exposure and it impacts the value of the firm.
Market. Economic exposure is measured with regard to competitors, future cash flows and value
of the firm.
