The absolute exposure is the amount currently invested in a particular position and represents the amount that an investor could potentially lose on that investment. Absolute exposure is, therefore, the risk that a position carries in an Account. The position risk is equal to the value of that position. Therefore, exposure takes into account the holding amount and market price to calculate the current absolute exposure. Analysing absolute exposure enables an investor to manage the amount of risk/ exposure of each position, by reducing absolute exposure in some positions and increasing absolute exposure in other positions to balance risk.
Non-Margined Products
For bonds, the accumulated accrued interest that has not yet been realised is included in calculating the bond position exposure. Where Client Currency is different from the Account Currency, the foreign exchange rate is factored into the exposure amount, to determine the exposure in Client Currency. Saxo uses this method for measuring exposure for the following product types:
- Bonds
- Shares
- Mutual Funds
- Equity Premium Style ETOs
- FX Options
Assume a DKK Account holds a bond XYZ position of 60, with a current market price of USD 100, and where the market exchange rate USD/DKK is 1 USD = DKK 6, then the absolute exposure of bond position XYZ is calculated as:
Margined Products
For margin products such as FX, CFDs, Futures and Future Premium Style ETOs, the exposure takes into account the holding amount at a rate of the difference between the close and entry price. Saxo measures the closing value of open positions in margined products by the gross unrealised profit and loss of the open position at close.
Where Client Currency is different from the Account Currency, the foreign exchange rate is factored into the exposure amount, to determine the exposure in Client Currency. Exposure for margin products is calculated as:
Absolute Exposure Percentage
The position exposure can be measured in relation to the total exposure, which is the total value of positions. It informs what percentage of the total value of positions is invested in a specific position. To measure what percentage of the total value of positions is invested in a position XYZ equity, where the value of XYZ holding is EUR 11 500 and the total exposure/ value of positions is EUR 590 000:
The sum of the Absolute Exposure of all positions in an Account is the Value of Positions. Note, however, that the Value of Positions is a real-time value. To view absolute exposure, on position level, in real-time requires a price subscription.