The Exposure is the shift in value of the trade with each unit shift in the price (or value) of the underlier
So a trade to buy 100 tonnes of coal might shift by $1 per tonne, for each shift of $1 per tonne in the price of coal, the 100 tonnes Exposure is 100
100 whats?
Let's look at the units. We want the shift in price = 100 tonnes * $1 per tonne = $100, per unit shift in the price of coal = $100 / $1 / tonne = 100 tonnes
If you've looked at the definition of Delta you will have seen that Delta is properly the change in value per unit of the trade per change in value per unit of the underlier
So we get the important formula Exposure = Position * Delta
A trade may have multiple deltas and multiple Exposures - our simple Forward deal may not be as simple as we think:
There is a Delta and Exposure to the value of coal
If we want to know the current value of the trade then there is a Delta and Exposure to the interest rate
If we are a European trading organization and we want to know the value of our trade in Euros then there is a Delta and an Exposure to the FX rate between Dollars and Euros - the FX Exposure
Exposures are additive - they can be summed across a set of trades or portfolios
Deltas are not additive - because they are dimensionless ratios