Slide  17 of  32
Transaction Exposure
u Currency correlation, example
German mark and Swiss franc increase in
value
F MNC X has net inflow exposure from Germany
F MNC Y has net outflow exposure in Germany
with similar sized inflow exposure from
Switzerland
DM and SF have a correlation of 94 percent
Net transaction exposures
F MNC X maintains currency risk exposure
F MNC Y has offsetting DM and SF exposure