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Transaction exposure refers to:
ARisk on future contractual FX cash flows due to rate movements
BRisk arising from translating foreign accounts to home currency
CLong-term cash flow risk affecting competitiveness
DRisk of changes in book equity from rate changes
Answer & Solution
Correct answer: A. Risk on future contractual FX cash flows due to rate movements
1. Identify what the question asks: this concept maps to transactionexposure (§10.1).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (A).
_Source: ICAI BoS CA Final Paper 2, Ch 10 "Foreign Exchange Exposure and Risk Management"_
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