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Economic Exposure
Lipson, Marc L. Technical Note F-1603 / Published September 9, 2009 / 10 pages.
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Product Overview

This note describes the economic exposure that arises from changes in currency exchange rates. After illustrating the economic impact of exchange rate changes, including a discussion of real exchange rate changes, the note provides a summary of methods used to manage exposure. The use of forward rates and money markets is explored in detail.

Learning Objectives

This note helps students clearly recognize the manner in which currency changes affect operating performance. Sufficient detail is provided on managing transaction exposure with forward and money markets that students should be able to develop their own hedges.

  • Overview

    This note describes the economic exposure that arises from changes in currency exchange rates. After illustrating the economic impact of exchange rate changes, including a discussion of real exchange rate changes, the note provides a summary of methods used to manage exposure. The use of forward rates and money markets is explored in detail.

  • Learning Objectives

    Learning Objectives

    This note helps students clearly recognize the manner in which currency changes affect operating performance. Sufficient detail is provided on managing transaction exposure with forward and money markets that students should be able to develop their own hedges.