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Transaction exposure

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Definition of Transaction exposure

Transaction Exposure Image 1

Transaction exposure

Risk to a firm with known future cash flows in a foreign currency that arises from
possible changes in the exchange rate. Related:translation exposure.



Related Terms:

Reinvoicing center

A central financial subsidiary used by an MNC to reduce transaction exposure by having
all home country exports billed in the home currency and then reinvoiced to each operating affililate in that
affiliate's local currency. It can also be used as a netting center.


Translation exposure

Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates.
Related: transaction exposure.


Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.


Balance sheet exposure

See:accounting exposure.


Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.



Economic exposure

The extent to which the value of the firm will change because of an exchange rate change.


Exposure netting

Offsetting exposures in one currency with exposures in the same or another currency,
where exchange rates are expected to move in such a way that losses or gains on the first exposed position
should be offset by gains or losses on the second currency exposure.


Transaction Exposure Image 2

Going-private transactions

Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open
markets.


Highly leveraged transaction (HLT)

Bank loan to a highly leveraged firm.


Intercompany transaction

transaction carried out between two units of the same corporation.


Operating exposure

Degree to which exchange rate changes, in combination with price changes, will alter a
company's future operating cash flows.


Picking transaction

Withdrawing parts or subassemblies from stock in order to
manufacture subassemblies or finished products.


Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.


Round-trip transactions costs

Costs of completing a transaction, including commissions, market impact
costs, and taxes.


Structured arbitrage transaction

A self-funding, self-hedged series of transactions that usually utilize
mortgage securities as the primary assets.


Taxable transaction

Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.


Transaction Exposure Image 3

Transaction

The financial description of a business event.


Transaction

A business event that has a monetary impact on an entity’s financial statements,
and is recorded as an entry in its accounting records.



Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.


Transaction loan

A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving
credit agreements involve loans that can be used for various purposes.


Transactions costs

The time, effort, and money necessary, including such things as commission fees and the
cost of physically moving the asset from seller to buyer. Related: Round-trip transaction costs, Information
costs, search costs.


Transactions motive

A desire to hold cash for the purpose of conducting cash based transactions.



 

 

 

 

 

 

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