Explain exchange rate risk, Financial Management

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Explain Exchange Rate Risk

Exchange-rate risk denotes to the risk the swap bank faces from fluctuating exchange rates throughout the time it takes the bank to lay off a swap it undertakes on an opposing counterparty earlier to the exchange rates change.  In addition, the dealer confronts credit risk from one counterparty defaulting and its comprising to fulfill the defaulting party’s obligation to other counterparty.


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