How To Read The Risk Numbers In The Calculator
The FX.Exposure calculator does not predict the market. It sizes what is on the line and shows you how much of it a hedge takes away. Here is what each part means.
Total exposure
The first tile is your total exposure, converted into your reporting currency at today's spot rate. Legs in the same currency are netted first: if you pay USD 1,000,000 and receive USD 400,000, your exposure is USD 600,000, not 1,400,000. Different currencies are never netted against each other, because there is nothing that says they will move together.
This is the number every risk figure below it is measured against.
Rate move assumed
This control sets the size of the adverse move being applied.
TYPICAL uses an indicative volatility for your actual currencies, scaled to your actual time horizon. It is roughly a one-in-six event: ordinary, not a crisis. Longer to your value date means a bigger typical move, because the market has more time to travel.
5% and 10% are fixed stress buttons. They ignore volatility and simply ask what a move of that size would do to you. Useful for a board paper, and honest about being a scenario rather than a likelihood.
The caption under the control always tells you the odds of the move you have selected, so you can judge whether it is realistic or plucked from the air.
The at-risk figure
This is the money the assumed move costs you, on your netted exposure, if you do nothing. It is not a maximum. It is a plausible bad day, and the caption states the odds.
If the market moves the other way you gain the same amount. The figure is shown as a loss because that is the side that damages a budget.
The timeline
Every leg you entered, in date order, with its amount, value date, indicative spot and forward, its value in your reporting currency, and its own share of the risk. Each row is stressed with its own currency's volatility and its own tenor, then scaled by how much of that currency actually nets out. The rows add up to the headline figure exactly, so you can always see where the risk is coming from and which dates carry it.
Range of outcomes
The strip at the bottom shows three points: the favourable end, the likely value at today's rate, and the adverse end. The favourable and adverse ends are today's value plus or minus the at-risk figure.
The caption tells you roughly what share of periods land inside that band, and how rare a move past either end would be. It is a likely range, not a maximum. Real markets go outside it sometimes, and that is the point of the odds being stated.
Making a decision with it
Compare the forward points on a full hedge with the at-risk figure. The forward points are the price of certainty on your numbers.
Key takeaway: These numbers are not a forecast. They size the range you are already exposed to, so you can decide how much of it to keep. They show the downside being reduced alongside the upside being given up.