INDIAN INSTITUTE OF FOREIGN TRADE

Course Outline – International Financial Management

EPGDIB (Hybrid)
Semester-III
International Financial Management

Course Coordinator: Dr. Satinder Bhatia Course Credits: 3

Course Introduction

Multinational firms are defined as firms that engage in some form of international
business. Their managers conduct international financial management, which involves
international investing and financing decisions that are intended to maximize the value of
the firm. Their operations expand from exports & imports to establishing subsidiaries in
foreign countries. International financial management is important even to companies
that have no international business because these companies must recognize how their
foreign competitors will be affected by movements in exchange rates, foreign interest
rates, labour costs and inflation. Such economic characteristics can affect the foreign
competitors’ costs of production and pricing policies. This course will go into these
aspects and study the forecasting and impact of exchange rate changes.

Course Objectives

The objective of this course is to

 Explain how exchange rates are determined /forecasted;
 Explain the different techniques used for hedging based on anticipated exchange
rate movements;
 Explain how governments can directly and indirectly influence exchange rates;
 Explain the concept of Interest Rate Parity and how it prevents arbitrage
opportunities;
 Explain the Purchasing Power Parity and the International Fischer Effect; and
 Explain how exposure to foreign exchange rate changes is measured and
managed.

Programme Learning Goals

LG 3- Application of management concepts for decision making in an international business context

Students will demonstrate the ability to apply their understanding of management concepts for decision making in
an international business context with specific focus on fluctuations in foreign exchange rates. *

1
Pedagogy

As the subject is of practical utility and significance, the course would be

conducted in an interactive manner. Conceptual framework of the subject shall be
covered adequately through lectures/power point presentations.

Linkages with Other Courses

The course provides international perspective in various areas of finance

assuming that basic exposure in financial management is already given.

Evaluation

 Case Discussions* 20
 Assignments 40
 End Term Examination 40

Text Book: International Financial Management

Author: Jeff Madura, Cengage Publishing

Session Contents Readings

Foundations of International Financial
Management:
Introduction to International Financial Chapter 2 of Text Book
1&2
Management, The International Monetary
System, The International Monetary System and
The Balance of Payments

Foreign Exchange Rate Determination:

Factors that influence exchange rates,
3, 4, Government influence on exchange rates, Chapter 4, 6, 7, 8 and 9
5,6,7 International arbitrage and interest rate parity of Text Book
and Exchange rate forecasting

International Financial Markets

Forward, Futures and Options Markets,
8,9,10 Chapter- 3,5 of Text Book
Eurobond Market, Currency Derivatives

11, 12, Foreign Exchange Risk Management: Chapter- 10, 11, 12 of Text
13 Measuring and Managing Translation and Book

2
 Transaction Exposure, Measuring and Managing
Economic Exposure.

Cases and Exercises: Appropriate cases will be discussed in the class. Students are
advised to go through the Cases at the end of each chapter of the Text Book. These Cases
will also be discussed in the class.

References:

1) Multinational Financial Management, Wiley Publishing

- Shapiro

2) International Financial Management, Tata McGrawhill

- P.G.Apte

3) International Finance, Tata McGrawhill

- Maurice D.Levi