What is exchange rate risk?

Management Dictionary
Corporate and Market Finance

128 vues

Foreign exchange risk is the financial risk associated with fluctuations in exchange rates between currencies, affecting businesses, investors, and individuals in their international transactions. It can impact income, investments, or loan repayments depending on currency movements. A distinction is made between transaction risk, conversion risk, and economic risk. Its management relies on internal mechanisms (invoicing, netting) or external mechanisms (futures contracts, options), with a balance to be struck between cost and protection.

Liens et ressources

Mots clés

Currency, Financial Instruments, Fluctuation, Hedging, International Transaction

Auteur.e(s)

AJILI BEN YOUSSEF Wissem
Associate Professor of Finance
EM Normandie

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What is exchange rate risk?

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