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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.

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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.