Compare and contrast transaction exposure and economic exposure. Why would an MNC consider examining only its net cash flows in each currency when assessing its transaction exposure?

What factors affect a firms degree of transaction exposure in a particular currency? For each factor, explain the desirable characteristics that would reduce transaction exposure.

Kopetsky Co. has net receivables in several currencies that are highly correlated with each other. What does this imply about the firms overall degree of transaction exposure? Are currency correlations perfectly stable over time? What does your answer imply about Kopetsky Co. or any other firm using past data on correlations as an indicator for the future?