FX Risk
Short definition
FX risk is the way a change in exchange rates disturbs cash, profit or equity value. It comes from open positions, tenor and currency mismatch — not from a view that the rate is “high” or “low”.
Detailed explanation
Three layers: transaction (collections/payments), translation (consolidation) and economic (competition/price). The CFO’s cash risk is transactions and maturing debt; translation profit is not cash.
A natural hedge (FX revenue versus FX costs and debt) shrinks the open book. Residual risk is managed with forwards, options or tenor matching. REER corrects a view stuck on one pair.
Why it matters for the CFO
In Türkiye, USD/TRY and EUR/TRY move price, inventory and debt service together. Open FX debt can break DSCR while EBITDA still looks solid.
How to read it
The position table is FX assets minus FX liabilities, by tenor and currency. A single “dollar gap” line hides tenor mismatch. There is no universal hedge ratio.
Related calculators
Güven Sayılgan’s writing on this topic
The Foreign-Exchange Position Table and Its Use in Currency-Risk Management
The foreign-exchange position table brings together a firm’s foreign-currency assets, liabilities and cash flows by currency and maturity, so that net exposure,
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Read → FinansThe Role of USD/TRY, EUR/TRY and the Real Effective Exchange Rate in Corporate Financial Management Decisions in Türkiye
For companies operating in Türkiye, USD/TRY, EUR/TRY and the real effective exchange rate are complementary indicators; the CFO should read them together for co
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Read → FinansHow Can One Tell Whether the Exchange Rate Is High or Low?
It is not possible to say whether a country’s exchange rate is “high” or “low” by looking at the nominal rate. Nominal levels reflect past inflation, currency r
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Read → FinansWhat Is the “Equilibrium” TL/USD Exchange Rate for Türkiye Today?
The “equilibrium” (equilibrium exchange rate) level cannot be pinned down from a single indicator or theory alone. When EBA, PPP and REER approaches are assesse
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.