Course Code EF-06: International Financial Management Intent

To acquaint students with the financial management problems of multinational corporations

and prepare to solve these problems.

Content

1. Introduction to IFM: Why do nations trade? Why study international Finance?

Evolution of the MNCs, Process of overseas expansion, Recent Changes in global
financial markets

2. The Foreign Exchange Market: Organization of Forex market, its participants; Spot
market: spot quotations (Direct and Indirect), transaction cost, currency arbitrage,
mechanism of spot transaction; Forward Market: Participants, forward quotation,
cross rates and Relationship between spot and forward rate, foreign exchange
market in India.

3. International Monetary System: Alternate Exchange rate systems, Fixed and

Floating, Exchange rate regimes: Journey from Gold Standard to European
monetary system, Role of IMF, current scenario of exchange rate regimes, SDRs

4. Parity Conditions in International Finance: Arbitrage and law of one price, PPP,
IRP, Forward rates and Future spot rate parity, The Fisher Effect and The
International Fisher Effect

5. The Determination of Exchange Rates and Currency Forecasting: Determinants of

exchange rate, Demand and supply curves of currency, setting the equilibrium spot
exchange rate, PPP as a model of exchange rate behavior, Structural models of
exchange rate determination, fundamentals of central bank interventions, exchange
rate forecasting.

6. Measuring and Managing Exposure: Measuring and managing accounting exposure

(translational and transactional) and economic exposure, political exposure:
Political Risk Model, Country Risk, managing political risk; Nature and
measurement of interest rate risk, FRAs, Interest rate options, interest Rate caps,
floors and collars

7. International portfolio Investment: Measuring total return from foreign investing

Bonds and stocks, international diversification and barriers, international CAPM,
Optimal international asset allocation.

8. International Project Appraisal: A review of NPV approach, the APV Framework,

Project appraisal in international context, incremental cash flows, Exchange rate
risk and cost of capital, Issues in Foreign Investment analysis.

9. Case studies and discussions on current issues