Exchange risk

Exchange risk

The variability of a firm's value that results from unexpected exchange rate changes, or the extent to which the present value of a firm is expected to change as a result of a given currency's appreciation or depreciation.

Foreign Exchange Risk

The risk that the return on an investment may be reduced or eliminated because of a change in the exchange rate of two currencies. For example, if an American has a CD in the United Kingdom worth 1 million British pounds and the exchange rate is 2 USD: 1 GBP, then the American effectively has $2 million in the CD. However, if the exchange rate changes significantly to, say, 1 USD: 1 GBP, then the American only has $1 million in the CD, even though he/she still has 1 million pounds. Foreign exchange risk is also called exchange rate risk.
References in periodicals archive ?
While foreign exchange risk is a problem to on-grid and off-grid power project developers alike, the nature of the risks can vary slightly between them.
M2 EQUITYBITES-June 12, 2014-Wells Fargo Foreign Exchange Risk Management Group names Matthew Daniel as head of its FX team
Global Banking News-June 12, 2014--Wells Fargo International names head of Foreign Exchange Risk Management Group
US $250 million has been projected to be raised by the National Development Bank and DFCC Bank, each in foreign borrowings with the foreign exchange risk to be borne by the Treasury.
6 July 2012 - A Ramon Espinosa has been hired as quantitative research head at the foreign exchange risk management team of Wells Fargo International Group, the foreign exchange specialist, part of Wells Fargo & Co (NYSE:WFC), said on Thursday.
Foreign exchange risk applies to all financial instruments that are in a currency other than your domestic currency.
In addition to basics of risk management, he covers techniques of hedging, the role of information systems in exposure management, and presents select case studies of foreign exchange risk exposure management.
dollars to eliminate currency exchange risk for the Wien & Malkin partnership.
This is, however, not to say that companies do not suffer from economic exchange risk.
Exchange rate fluctuations affect operating cash flows and firm value through the translation, transaction, and economic effects of exchange risk exposure.
Expanding hedging principles' scope to include foreign exchange risk (except for hedges of net investments in foreign entities).