Foreign Exchange risks
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What are the types of foreign exchange risk companies face when they deal internationally? It would be great if you could explain in detail with examples if possible.
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Solution Summary
Types of Foreign Exchange risks are determined. International examples are provided.
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Types of forex risk include:
Credit Risk: As it is difficult to ascertain the credibility of a buyer in foreign market due to physical distance and lack of knowledge about distant companies in foreign locations, there is a high risk that the counterparty will not settle an obligation for full value or may not pay at all.
Liquidity risk: the risk that a counterparty (or participant in a settlement system) will not settle an obligation for full
value when due. Liquidity risk does not imply that a ...
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- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
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