Transaction Risk

The exchange rate risk associated with the time delay between entering into a contract and settling it. The greater the time differential between the entrance and settlement of the contract, the greater the transaction risk, because there is more time for the two exchange rates to fluctuate.

Investopedia Says:
Transaction risk creates difficulties for individuals and corporations dealing in different currencies, as exchange rates can fluctuate significantly over a short period of time. This volatility is usually reduced, or hedged, by entering into currency swaps and other similar securities.

Related Links:
Find out how a currency's relative value reflects a country's economic health and impacts your investment returns. Forces Behind Exchange Rates
Baffled by exchange rates? Wonder why some currencies fluctuate while others don't? This article has the answers. Floating And Fixed Exchange Rates

The risk that changes in Exchange Rates during the time it takes to settle a Cross-Border contract will adversely affect the profit of a party to the transaction. Currency Swaps and Currency Futures are designed to reduce transaction risk. See also Foreign Exchange.

The risk that future cash transactions will be affected by changing exchange rates.