For example, if you are a U.S. investor and you have stocks in Canada, the return that you will realize is affected by both the change in the price of the stocks and the change in the value of the Canadian dollar against the U.S. dollar. So, if you realize a 15% return in your Canadian stocks but the Canadian dollar depreciates 15% against the U.S. dollar, this will amount to no gain at all.
Academic studies of currency risk suggest - although without absolute certainty - that investors bearing currency risk are not compensated with higher potential returns, meaning it is essentially a needless risk to bear.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Currency risk — Categories of financial risk Credit risk Concentration risk Market risk Interest rate risk Currency risk Equity risk Commodity risk Liquidity risk Refinancing risk … Wikipedia
Currency risk — Related: Exchange rate risk Currency risk sharing An agreement by the parties to a transaction to share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction … Financial and business terms
currency risk — Related: exchange rate risk The potential for a shift in exchange rates, which would be detrimental to a trader s position. Chicago Mercantile Exchange Glossary * * * currency risk currency risk ➔ risk1 * * * The potential for losses arising… … Financial and business terms
currency risk — noun A form of risk resulting from changes of currency exchange rates … Wiktionary
currency risk — Fin [m1]1. the risk that a currency used for a transaction may lose value 2. the possibility of a loss or gain due to future changes in exchange rates … The ultimate business dictionary
currency risk — See: exchange rate exposure … Accounting dictionary
currency risk — See exchange rate exposure … Big dictionary of business and management
currency risk sharing — An agreement by the parties to a transaction to share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction. Bloomberg Financial Dictionary … Financial and business terms
foreign currency risk — ➔ risk * * * foreign currency risk UK US noun [C or U] (also foreign currency exposure) FINANCE ► CURRENCY RISK(Cf. ↑currency risk) … Financial and business terms
Risk — Typically defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. The New York Times Financial Glossary * * * ▪ I. risk risk 1 [rɪsk] noun 1. [countable, uncountable] the possibility that… … Financial and business terms