Question

 

What you do mean by transaction exposure? Describe various techniques available to manage transaction exposure both in the short term as well as the long term.

12 Sep 2025
Answer :
Word Count : 492
Transaction exposure in international business finance refers to the risk that a company faces due to fluctuations in exchange rates between the time a financial commitment is made and the time it is settled. This type of exposure arises when a firm engages in cross-border transactions involving foreign currencies, such as exporting or importing goods, borrowing or lending in foreign currency, or entering into contracts payable or receivable in foreign currencies. The primary concern of transaction exposure is that changes in exchange rates can lead to unexpected gains or losses, affecting the firm’s cash flows and profitability. For example, if a U.S. company agrees to receive payment in euros in three months, any depreciation of the euro against the U.S. dollar during that __________ _________ _________ __________ ________.
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