What is Translation Exposure

Translation exposure is used in the context of international foreign exchange markets, translation exposure refers to the risk which a company or firm faces when its assets and liabilities are denominated in a foreign currency. It can be better understood with the help of an example, suppose a USA based company has assets and liabilities denominated in euro than if euro falls or rises with respect to dollar in foreign exchange market than the company has to record the profit or loss arising out of such fluctuation in the books of account. It is also known as accounting exposure.

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