Okuzeka
Finance & Banking vocabulary · Risk Management

Potential future exposure

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, potential future exposure means: An estimate of how large counterparty exposure could become over a future horizon at a specified confidence level.

In Turkish: potansiyel gelecekteki risk tutarı

How it is used

Abbreviated PFE; distinguish exposure size from the probability that the counterparty defaults.

Example sentences

  1. Potential future exposure rose after volatility increased in the currency portfolio.

    Wider price movements can produce larger future claims.

  2. The bank compared potential future exposure with the counterparty's approved limit.

    A forward-looking exposure measure supports limit monitoring.

Common collocations

  • potential future exposure profile
  • PFE limit
  • counterparty riskThe risk that the other party in a financial deal, such as a derivative, repo or FX trade, fails to pay or deliver what it owes before the deal is completed.
  • exposureThe amount of money a bank could lose to a particular borrower, sector, country or market if things go wrong.

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.