What is absolute exposure?

Understanding Absolute Exposure in Investing

Absolute exposure refers to the total amount invested in a particular position and represents the potential loss an investor could incur on that investment. It reflects the risk level associated with a specific position within an account.

How Absolute Exposure Is Calculated

• Exposure considers both the holding amount and the market price of the investment.

• It equals the current value of the position, determining the financial risk involved.

Managing Absolute Exposure

Investors can balance risk by adjusting absolute exposure across different positions:

• Reducing exposure to limit potential losses in higher-risk assets.

• Increasing exposure in more stable positions to optimise portfolio balance.

Non-Margined Products and Exposure Calculation

For bonds, accumulated accrued interest that has yet to be realised is included when calculating the bond position exposure.

If the Client Currency differs from the Account Currency, the foreign exchange rate is factored into the exposure amount to determine the equivalent exposure in the Client Currency.

Products Using This Exposure Measurement

This method applies to the following non-margined products:

• 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:  

Exposure Calculation for Margined Products

For margin products such as FX, CFDs, Futures, and Future Premium Style ETOs, exposure is determined by the holding amount, factoring in the difference between the close price and the entry price.

How Exposure Is Measured

The closing value of open positions in margined products is calculated using the gross unrealised profit and loss of the position at close.

If the Client Currency differs from the Account Currency, the foreign exchange rate is incorporated to determine exposure in the Client Currency

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:

‍