Which concept refers to changes in a financial position due to foreign currency changes between contract establishment and settlement?

The concept of transaction exposure precisely refers to the risk associated with changes in financial position due to fluctuations in foreign currency exchange rates that occur between the time a contract is established and when it is settled. This type of exposure affects companies that engage in international trade or transactions that involve different currencies. For instance, if a company agrees to pay a supplier in a foreign currency and the currency value changes before the payment is made, the company may end up paying more or less than initially anticipated, thereby affecting its cash flow and profits.

Transaction exposure is distinct from translation exposure, which deals with the impact of exchange rate changes on the financial statements of a company that operates in multiple currencies, and economic exposure, which covers the broader effects on a company's market value due to fluctuations in exchange rates over the long term. Leading and lagging refers to strategic actions that companies can take regarding payment timings to mitigate these exposures, but it does not define the concept of changes in financial position due to currency fluctuations between contract establishment and settlement.