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Glossary

Exposure

Definition

Being subject to risk, such as an exposure to foreign currency exchange-rate fluctuations.

What is exposure? 

In finance, exposure refers to the degree to which a company or investor is open to financial risk, market movements, or investment losses. Exposure can be in various forms, such as market exposure, credit exposure, or operational exposure.

Why is exposure important to consider when trading? 

Understanding exposure is critical for traders and investors as it helps in assessing potential risks and rewards associated with different investments or strategies. Managing exposure effectively is key to protecting against significant losses, especially in volatile markets. Traders use various techniques, such as diversification and hedging, to mitigate their exposure and align it with their risk tolerance.

Related Items

Net exposure Exposure coverage Risk reversal Hedge
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Put this into Practice

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