CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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What is exposure factor?

Exposure factor

This is the proportion of the value of an asset that is likely to be lost due a particular risk. It's expressed as a percentage of the original value.

Where have you heard about exposure factor?

If you're in business, you might have heard about how it's used in risk assessment. For example, you need an exposure factor in order to calculate single-loss expectancy.

What you need to know about exposure factor.

It is expressed as a percentage of the original asset. So if the asset is completely lost, then the exposure factor would be 1.0. If the value of the asset is reduced by two thirds, the exposure factor is 0.66. The exposure factor can only be calculated in relation to a specific risk - such as fire, or a security threat like hacking. If the value of a building would be reduced from £1,000,000 to £250,000 by a fire, the exposure factor for the risk of fire to the building would be 75%.

Find out more about exposure factor.

To understand exposure factor, first you'll need to understand risk. Check out our guide to find out more.

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