INTERNATIONAL FINANCIAL MANAGEMENT

Course code: 12MF62 Credits: 3.0 Total No. of sessions: 30

Course Objectives:
To understand the international trade related financial concepts and thereby making investment
decisions.
The course is an introduction to an evolving and growing literature on international finance.
Topics covered in the course include the international monetary system, the concept of balance
of payments, theories of balance of payments, parity conditions, models of exchange rate
determination, forward looking market instruments (forward, futures, and options markets),
Eurocurrency markets, and financial crises.
Course Content:
UNIT I: Introduction
An overview, Importance, nature and scope, Theories of International business, International Business
Methods, Recent changes and challenges in IFM. Balance of Payments (BoP), Fundamentals of BoP,
Accounting components of BOP, Factors affecting International Trade flows, Agencies that facilitate
International flows.
UNIT II: International Monetary System
Evolution, Gold Standard, Bretton Woods system, the flexible exchange rate regime, the current
exchange rate arrangements, the Economic and Monetary Union (EMU).
UNIT III: Foreign Exchange Market
Function and Structure of the Forex markets, major participants, types of transactions and settlements
dates, Foreign exchange quotations, process of arbitrage, speculation in the forward market. Measuring
exchange rate movements, Factors influencing exchange rates. . Foreign Exchange Risk and exposure
and management transition exposure, translation exposure and economic exposure and the
management of these exposures.Government influence on exchange rates - exchange rate systems.
International arbitrage and interest rate parity . Relationship between inflation, interest rates and
exchange rates - Purchasing Power Parity - International Fisher Effect.
UNIT IV: Asset -liability Management
Foreign Direct Investment, International Capital Budgeting, International Capital structure and cost of
capital. International Financing Equity, Bond financing, parallel loans.International Cash management,
accounts receivable management, inventory management. Payment methods of international trade, trade
finance methods, Export - Import bank of India, recent amendments in EXIM policy, regulations and
guidelines. Portfolio Analysis, Portfolio Selection and capital market theory in International context.
UNIT V: Financial Management of the Multinational Firm
Introduction- Foreign Direct Investment - Cost of Capital and Capital Structure of a Multinational Firm -
ADRs, GDRs, ECBs - Syndication - Multinational Capital Budgeting - Multinational Cash Management -
Country Risk Analysis - International Taxation - Double Taxation Avoidance Agreements
Text Books:
1. P.G.Apte, International Financial Management, Tata McGraw-Hill, New Delhi, 2/e, 2006
2. Eun and Resnik, International Financial Management, Tata Mcgraw Hill, 5/e, 2008.
Reference Books:
1. Alan C.Shapiro, Multinational Financial Management, John Wiley & Sons, 8/e, 2006
2. Jeff Madura, International Financial Management, Thomson Publications, 8/e, 2006
3. Eun and Resnik, International Financial Management, Tata Mcgraw Hill, 4/e, 2008.