December 2025
Intermediate to advanced
561 pages
27h 17m
English
book
International Financial Management: An Analytical Framework, 2nd Edition by Pearson
by Thummuluri Siddaiah
Content preview from International Financial Management: An Analytical Framework, 2nd Edition by Pearson
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162 INTERNATIONAL FINANCIAL MANAGEMENT
Foreign Exchange Risk
The terms foreign exchange exposure and foreign exchange risk are used interchangeably although
they are conceptually different. Maurice D. Levi defines foreign exchange risk as “the vari-
ance of the domestic currency value of assets, liabilities, or operating incomes that is attrib-
utable to unanticipated changes in foreign exchange rates.” By definition, foreign exchange
risk depends on the exposure, as well as the variability of the unanticipated changes in the
relevant exchange rate. Formally stated,
Va
rV
ar
2
() (
),
∆= ∆RV Sb
where
Var( RV)
∆
= Variance of the change in value of a business item caused by unanticipated
changes in the foreign exchange rate
b
= Regression coefficient whi ...
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