Foreign exchange risk

Foreign exchange risk
  (exchange rate risk)
  Risk that the market value of the bank, measured in the base currency, is exposed to fluctuations in foreign exchange rates. This risk is quantified by the open currency position. The related standard reports are:
• Open currency position.
• Forex risk analysis on FCY interest.
  The open currency position report gives information about the open currency position (OCP) per currency, OCP per currency group and the total OCP. The open currency position is the measure of foreign exchange risk. It is the difference between all assets and liabilities plus forex (conditional and unconditional) purchases and sales in a foreign currency. The forex risk analysis on foreign currency interest report gives information about the risk that the FCY interest is exposed to fluctuations in foreign exchange rates. See also Position, position administration tables, Standard position codes, combined position code, Risk management, Forex, Open currency position, Mismatch, Interest risk, Liquidity risk, forward revaluation, interest revaluation, break even and Nostro projection.

International financial encyclopaedia . 2014.

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