Credit Risk & Underwriting
Currency Risk in Maritime Transactions
Summary
Currency risk arises when vessel income, operating costs, debt, capital expenditure or asset prices are denominated in different currencies.
Why this matters in ship finance
Even ships earning US dollars may pay crew, repairs, taxes or loans in other currencies.
The concept
Exposure involves transaction currency, reporting currency, floating payment dates and possible capital controls. Natural matching and derivatives can reduce selected exposures.
How it is used in practice
Inventory revenue, cost, debt-service and residual-value currency streams; stress exchange rates and hedge effectiveness.
Practical issues
Functional and presentation currency in financial reporting are not the same as the currencies of economic cash flows.
How ShipFinance.ai uses this concept
Present net currency exposures and sensitivities at vessel and group level.
Key takeaways
- Currency matching matters
- FX hedges have costs and limits
- Group accounting can hide vessel cash mismatches