Transaction Exposure

Transaction exposure refers to the risk that counterparties face when transacting with each other. Transaction exposure covers a wide area and encapsulates all of the risks inherent in engaging with other parties. It most typically refers to foreign exchange and interest-rate risk (which can be hedged) but it can also include counterparty credit risk i.e. the risk that a counterparty fails to perform or becomes insolvent as well as political and regulatory risk.