In finance, exposure refers to the amount of risk or potential loss an investor, business, or financial institution faces due to their investments, financial positions, or activities. It is essentially the degree to which one is vulnerable to financial loss if market conditions move unfavorably.

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Exposure can be measured as:

• The total monetary value at risk in a particular asset, sector, or market (e.g., having $10,000 invested in stocks means a $10,000 exposure to the stock market).
• A percentage of a total portfolio allocated to a specific asset or risk (e.g., 30% exposure to equities in a diversified portfolio).
• The potential impact of various financial risks, such as market risk, currency risk, interest rate risk, or credit risk, on the value of assets or liabilities.

Managing financial exposure is a core part of risk management, often achieved through diversification, hedging, or asset allocation strategies to limit potential losses.

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Example: A multinational corporation faces substantial currency risk exposure because it generates revenue in several different currencies.

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