The maximum loss suffered from a default by a counterparty.

Similar financial terms

Accounting exposure
The change in the value of a firm's foreign currency denominated accounts due to a change in exchange rates.

Translation exposure
Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates.

Transaction exposure
Risk to a firm with known future cash flows in a foreign currency that arises from possible changes in the exchange rate.

Operating exposure
Degree to which exchange rate changes, in combination with price changes, will alter a company's future operating cash flows.

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Risk premium approach

The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.

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