The risk that movements in exchange rates will adversely affect the value of a particular transaction.

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Transactions exposure refers to the risk that a company faces due to the fluctuations in exchange rates that can affect the value of a specific transaction. This can cause losses to the company if the value of the currency in which it is doing business falls against the currency in which the transaction is denominated. Translation exposure refers to the risk of changes in exchange rates that can impact the asset and liability values of a company's foreign subsidiaries. Economic exposure involves the risk of changes in exchange rates affecting a company's long-term investments and cash flows. Political risk refers to the risk of loss due to political events or instability in a country.

The Risk That Movements in Exchange Rates Will Adversely Affect