What is Net Exposure ?
Definition of Net Exposure
Brief Explanation of Net Exposure
The finance manager will modify the net exposure according to his or her financial commitment perspective – favorable, bearish or fairly neutral. A finance has a net lengthy exposure if the quantity spent in lengthy roles surpasses the quantity spent in brief roles, and has a net brief position if brief roles surpass lengthy roles. If the quantity spent in lengthy roles is equal to financial commitment in brief roles, this is called an industry fairly neutral strategy as net exposure is zero. A low net exposure does not necessarily indicate a low level of risk since the finance may have a significant deal of make use of. For this reason, total exposure (long exposure + brief exposure) should also be considered, as the two measures together provide a better sign of a fund’s overall exposure. Preferably, a fund’s lengthy roles should appreciate while its brief roles should decrease in value (enabling the brief roles to be shut at a profit). Even if both lengthy and brief roles move up or down together – in the case of an extensive industry advance or decrease respectively – the finance may still earn profits on its overall profile, based on the degree of its net exposure.