Question
What do you mean by Transaction exposure? Describe various techniques available to manage transaction exposure both in the short term as well as in the long term.
Answer :
Word Count : 540
Transaction exposure refers to the risk a company faces due to fluctuations in exchange rates between the time a transaction is initiated and the time it is settled. In international business finance, firms engage in cross-border trade where receivables and payables are denominated in foreign currencies. Any adverse change in the exchange rate between the domestic currency and the foreign currency during this period can result in a gain or loss. For example, if an Indian exporter sells goods to a US buyer and agrees to receive payment in US dollars after three months, depreciation of the dollar against the rupee during that period will reduce the exporter’s ________ _________ _______ ________ ___ __________ ____ ___.
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Transaction exposure refers to the risk a company faces due to fluctuations in exchange rates between the time a transaction is initiated and the time it is settled. In international business finance, firms engage in cross-border trade where receivables and payables are denominated in foreign currencies. Any adverse change in the exchange rate between the domestic currency and the foreign currency during this period can result in a gain or loss. For example, if an Indian exporter sells goods to a US buyer and agrees to receive payment in US dollars after three months, depreciation of the dollar against the rupee during that period will reduce the exporter’s ________ _________ _______ ________ ___ __________ ____ ___.
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