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Three Types of Foreign Exchange Exposure Three Types of Foreign Exchange Exposure:[pic 2][pic 1]Overview:Transaction ExposureRisk to Known Foreign Cash-flowsWhat we have been hedgingEconomic Exposure Two ComponentsAsset Exposure—risk to Assets/Liabilities (we know how to hedge)Operating Exposure—risk to Uncertain cash-flows (Harder to hedge)Translation ExposureRisk to Balance SheetsDue to a Change in Translated Value of a Foreign SubsidiaryImpossible to Fully.