1. COURSE MODULE
Instructor: Ragini Khanna e mail ID- Khanna_ragini@yahoo.com Mb- 9988531999
Course: International Finance (MBA IB 302)
Class: MBA IB Semester: III
International Finance a must for MBA IB students!!
International Finance deals with the financial decisions taken in the area of international
business. The growth in international business is evident in the form of highly inflated size of
international trade. The financial involvement of the trader’s exporters and importers and the
quantum of the cross country transactions have surged significantly. All this requires proper
management of international flow of funds for which the study of International Finance has
become indispensable!!
Course Objective: The course content has been designed in such a manner so as to equip the
students with international financial practices being followed at the global level i.e. to look
beyond the domestic boundaries- which is, indeed, the need of the hour. This course will give an
insight into the architecture of foreign exchange markets-participants, Cross, Spot, Forward and
Swap Rates, Inter-relationships between Foreign Exchange and Money Markets, Interest Parity
and Covered Interest Arbitrage, Swap Transactions and positions etc., International Monetary
system with its history, the types of foreign exchange operations and exposures along with the
hedging techniques, Country Risk analysis, Eurobanking, International Financial Institutions,
Structure of Balance of payment and finally trading at the International Stock Exchanges.
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2. Distribution of Marks:
MSE’s 15
First hourly 5
Second hourly 5
Presentation 5
Assignments 10
Assignment 1
Analyze trend of Rupee VS Dollar, Rupee Vs Euro, Rupee Vs Ruble, Rupee Vs Yen and
Rupee Vs Pound Sterling for the past 3 months and its impact on the economy. How do you
Project the Future of Dollar in the near future.
Purpose: Understanding of foreign exchange market requires the understanding of current trends
in foreign exchange so with this purpose assignment is given to the students.
Assignment 2
Perform a comparative study of FDI flow analysis of China VS India. What Similarities &
differences can be accounted for FDI volumes between India and China?
Purpose: FDI supports development in the host country. We need to know the reasons why China
is able to attract more FDI than India because these are the 2 countries which are in direct
competition in the international market.
Assignment 3:
Analyze the trend of FII since liberalization in India and the latest impact of FII on the Indian
Stock Exchanges.
Purpose: FII’s are practically driving Indian stock markets. So students need to know their roles
and impact.
Assignment 4
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3. Analyze the various “International” sources of financing followed by (atleast 5) Indian
Companies/ Multinational Corporations operating in India. The entire issue/ offering has to be
analyzed in detail.
Purpose: With the help of this assignment the students will get an idea of the various modes of
financing that have been actually been used by the companies in the past which will ultimately
help in the better understanding of the topic discussed.
Note: more assignments can be included as per the requirement of the course.
Activity 1
Country and the currency
The students will be asked to discuss about the currencies of various countries along with where
that currency is trading w.r.t. rupee.
Purpose: the activity will enhance the knowledge of students as they will come to know about
the currencies of different countries (other than the few popular ones) by mutual effort.
Activity 2
Let’s know the International Stock Exchanges
Students will be asked to discuss about the various stock exchanges of the world – their method
of operation, trading, settlement system, market cap, major indices etc.
Lecture Lecture Content Assignments
1 Introduction to the subject:
Meaning of international finance
Reason for increasing importance of international
finance.
International finance and global economy.
Role of international finance manager in
multinational corporations
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4. 2 International financial environment: Assignment 1 Analyze
trend of Rupee VS Dollar,
Defining foreign exchange market
The exchange rate Rupee Vs Euro, Rupee Vs
Spot market. Ruble, Rupee Vs Yen and
Rupee Vs Pound Sterling
for the past 3 months and its
impact on the economy.
How do you Project the
Future of Dollar in the near
future?
3 International financial environment:
Forward Market
Quotation at the foreign exchange market-
Direct quote
indirect quote
Two way quotes
4 International financial environment:
Relationship between bid and ask prices of currencies,
spread and cost of transaction.
Cross Rate
5 Discussion :
Depreciation Vs Appreciation
Devaluation Vs Revaluation
Of various currencies in the past.
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5. 6 Structure of Indian foreign exchange market:
History, Developments & Current Status.
7 Exchange rate determination
Factors Affecting exchange rate
Expectations and asset model of exchange rate
determination
Central Bank Reputation
Central Bank Independence
8 Case Study 1: The Mexico Peso problem
Case Study 2: The Bank of England Gains
Independence.
9 Theories of foreign exchange rate movement and
international parity conditions
Purchasing power parity
Absolute purchasing power parity,
10 Theories of foreign exchange rate movement and
international parity conditions
Relative Purchasing Power Parity
International Fisher Effect
11 Foreign Exchange Exposure: Meaning, Introduction
Transaction Exposure
Transaction Exposure
Operating Exposure
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6. 12 Foreign Exchange Exposure: Meaning, Introduction
Transaction Exposure
Hedging and Management of Transaction
Exposure
13 Case Study 1: Computing Transaction exposure for
Boeing.
14 Foreign Exchange Exposure: Meaning, Introduction
Hedging and Management of Translation
Exposure and Operating Exposure.
15 International Trade and flow of funds:
Introduction
Balance of Trade
Balance of Payment
16 International Trade and flow of funds:
Measuring impact of exchange rate movement on
the balance of payment
India’s Balance of Trade and Payment
A detailed discussion on foreign exchange reserves of
India
17 International Monetary System
The Gold Standard, 1876-1913
Decline of Gold Standard
The inter-war years, 1914-1944
The Bretton Woods System, 1945-1972
The Smithsonian agreement
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7. The Flexible Exchange Rate Regime, 1973-
Present
Alternative Exchange Rate System
Evaluation of Floating Rate
18 Country Risk Analysis:
Nature of Country Risk Assessment
Economic Risk Indicators
19 Country Risk Analysis:
Techniques to Assess Country Risk
Parameters of Country Risk
Rates of Country Risk
Case Study 4: BP BILLITON CASE STUDY ON
INTERNATIONAL FINANCE
20 Foreign Direct Investment Assignment 2
Perform a comparative
Why do firms invest abroad
study Of FDI flow analysis
The Indian Perspective
of China VS India. What
Similarities & differences
Case Study 5: Case Study on Foreign Direct
can be accounted for FDI
Investment.
volumes between India and
China?
21 Foreign Institutional investment: Assignment 3: Analyze
the trend of FII since
Meaning, Needs importance liberalization in India and
The Indian perspective the latest impact of FII on
the Indian Stock
Exchanges.
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8. 22 International Financial Institution/ Development
Banks
World Bank : History , Functions, Group
Members, Member Countries
World bank aid’s to India
23 International Financial Institution/ Development
Banks
IMF: History , Role, Functions, Member
Countries
Help to India
24 International Financial Institution/ Development
Banks
ADB: History , Role, Functions, Member
Countries
Help to India
25 Export & import financing: role of commercial banks.
Basic instruments, private non-bank sources of finance
26 Financial operations of multinational corporations:
Multinational project evaluation
Reasons for changes in cash flows, (Subsidiary
Vs Parent perspective)
27 Cost of Capital and Capital Structure of the
Multinational Firm
Cost of Capital for MNC’s Vs Domestic Firms
Determinates of Affiliates/ Subsidiaries Capital
Structure
28 Cost of Capital and Capital Structure of the
Multinational Firm
The Optimal Capital Structure and Cost of Capital
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9. Cost of Capital across countries
Practical Framework of the Corporate Financing
Decisions
29 Capital Budgeting Techniques for Multinationals
NPV &APV method
30 Multinational Cash Management:
Introduction to multinational Cash Management
Objective
Centralized Perspective of Cash Flow Analysis
31 Multinational Cash Management:
Techniques to Optimize Cash Flow
Netting
Investing Excess Cash
32 Financing Of Multinational Corporations: Assignment4:-Analyze the
various “International”
International equity Market sources of financing
ECBs
followed by (atleast 5)
International Bond Market
Indian Companies/
Euro Market: Euro Commercial Paper, Euro
Medium term Notes etc. Multinational Corporations
operating in India. The
entire issue/ offering has to
be analyzed in detail.
33 International Trade financing:
Introduction and problems faced by developing
countries for promoting trade
Management of credit risk
Documents required such as letter of credit, Bill
of lading etc.
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10. International Trade financing:
International Trade financing In India
Role of EXIM bank
35 International Equity Market:
The ADR &GDR Issues
Mechanics, Benefits and role of depositary
Guidelines of Level 1
36 International Equity Market:
The ADR and GDR issue
Guidelines of Level 2
37 Derivative Contracts
Futures & Forward contracts:
Meaning and Basics
Margin Systems
Trading & Settlement Rules
Marking to Market
38 SWAP
Introduction & Conceptual Framework
Evolution
Terminology
39. SWAP
Interest Rate SWAP
40. Case Study 6- Dow Chemical swaps Fixed-for-Fixed
with Michelin.
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11. 41 SWAP
Currency Swaps & their
Pricing, Working, Rationale
42 Case Study 7- Dow Chemical swaps Fixed-for-Floating
with Michelin.
43 ECBs: External Commercial Borrowings and its
guideline & Current Scenario.
Specific guidelines issued by FIPB.
44 FEMA & FERA: Foreign exchange management Act,
History, Developments and Present regulation
45 International Stock Exchanges:
New York,
London,
Luxemburg,
third world and
Asian stock exchanges
Working and their influences.
46 Case Study 8:The Walt Disney Company’s Yen
Financing- Case Study Of Harvard Business
School
Recommended Books:-
Multinational Financial Management by Alan C. Shapiro
International Financial Management by PG Apte
International Finance by Maurice D. Levi
International Financial Management by B. Resnick
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12. PRESENTATION:
1. The students will be divided into groups of 4.
2. The presentations will start at 9 a.m.
3. The duration of each presentation will be 15 to 20 minutes.
4. The preceding group will ask questions to the succeeding group and will get marks,
depending upon the validity of the question being asked.
5. The students are supposed to submit the synopsis of the material beforehand.
6. The evaluation criteria for presentation is as follows:-
Formals: 5 Presentation skills: 10
Query handling: 3 Questions: 2
Content: 10
Topics For presentation:
Role of Banks in Commodity Market
EURO: Analysis & Implications
Resource Mobilization by Indian Mutual Fund Industry.
Role of Foreign Institutional Investment in Indian Derivatives Market
International Stock Exchanges
Impact of Globalization on the Insurance Industry of India
FDI in Indian Retailing
Global Banking
Option and Futures trading in India
Will rebranding the Rupee would help brand India raise its currency?
Availability and Utilization of Foreign Exchange Reserves of India
The Yuan Revaluation- Impact on India.
Micro Finance- is it making the real impact?
International Financial investment strategies and regulations for Indian Companies.
The Blackberry Saga
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