Currency Exposure
The fraction of portfolio value exposed to a foreign currency.
Currency exposure measures how much of your portfolio's value is denominated in each foreign currency. A 30% EUR exposure means 30% of portfolio market value is in EUR-denominated assets. This exposure determines how sensitive your portfolio is to EUR/USD exchange rate movements. Unhedged currency exposure adds both risk and potential diversification benefits.
Formula
Related Terms
FX Risk
Risk from exchange rate fluctuations affecting foreign-denominated assets.
FX Volatility
Standard deviation of exchange rate changes — typically 5-15% annually.
Covariance Matrix
Captures how asset returns move together — the foundation of diversification.
Cross Rate
An exchange rate between two currencies derived via a third common currency.