EXPERIENTIAL LEARNING

INTERNATIONAL FINANCE & FINANCIAL MARKET

SUBMITTED BY – Ayush Garg (PGDMBM6CM2210)
SUBMITTED TO – PROF. MANEESH KETKAR
Introduction
An excellent opportunity to learn about the complex world of international finance and
financial markets in a hands-on setting was the International Finance & Financial Markets
experiential learning session.
For this practical learning exercise, which included a virtual live trading simulation in which
some students took prices and others set them, the class was divided into groups. Professor
Maneesh Ketkar played the role of the Reserve Bank of India (RBI) during the exercise. This
essay's goal is to analyse the simulation's most significant insights and learnings.

Simulation Overview:
- Participants assumed roles as either price takers or price makers.
- Aimed to simulate real-world dynamics of financial markets.

Roles in the Simulation:

- Price Makers: Responsible for setting prices based on various factors.
- Factors included market conditions, supply and demand, economic indicators.
- Price Takers: Tasked with negotiating bid and ask prices.

Realism in the Simulation:

- Real-time creation of term sheets and relevant documents.
- This added a high level of realism to the exercise.

This simulation aimed to provide participants with a hands-on experience of financial market
dynamics, allowing them to understand the roles and decisions made by both price makers and
price takers in the real world.
Key Takeaways:
1. The Function of Central Banks One of the most valuable lessons from the simulation was
a better understanding of how central banks operate, as demonstrated by Professor Maneesh
Ketkar's portrayal of the RBI. We learned how central banks employ a range of policy
instruments to control interest rates, regulate inflation, and uphold the financial system. This
understanding is essential for comprehending the macroeconomic variables that influence the
financial markets.
2. Market Dynamics: As price takers, we had to adapt to the rapidly changing market
conditions. We experienced first-hand the potential impact of news, the release of economic
data, and geopolitical developments on asset prices and trading decisions. This experience
drove home how important it is to monitor market trends and form fact-based conclusions.

Key Learnings

1.Negotiation Skills
1. During the exercise, participants in the role of price takers honed their
negotiation skills.
2. Effective negotiation involved clear communication, strategic thinking,
and reaching mutually beneficial agreements.
3. These improved abilities are highly applicable in real-world situations
where negotiation is pivotal for successful financial transactions.

2. Effective Risk Management

1. Price makers, responsible for setting bid and ask prices, had to conduct comprehensive
risk analysis and management.
2. This entailed evaluating factors such as market volatility, liquidity concerns, and the
potential impact of external events.
3. A key takeaway was the importance of striking a balance between risk and potential
returns

3. Enhancement of Negotiation Skills:

- During the exercise, participants in the role of price takers honed their negotiation skills.
- Effective negotiation involved clear communication, strategic thinking, and reaching
mutually beneficial agreements.
- These improved abilities are highly applicable in real-world situations where negotiation is
pivotal for successful financial transactions.
4. Effective Risk Management:
- Price makers, responsible for setting bid and ask prices, had to conduct comprehensive risk
analysis and management.
- This entailed evaluating factors such as market volatility, liquidity concerns, and the
potential impact of external events.
- A key takeaway was the importance of striking a balance between risk and potential returns.

5. Emphasis on Documentation and Compliance:

- The simulation underscored the significance of precise documentation and adherence to
regulatory requirements.
- It illustrated the meticulous attention to detail required in the financial industry through the
creation of real-time term sheets.
- Demonstrating compliance with legal and regulatory standards was a crucial aspect of the
exercise.

6. Exploration of Teamwork Dynamics:

- The exercise provided an opportunity to explore the dynamics of collaborative decision-
making within a group context.
- Effective teamwork was essential for achieving optimal trading outcomes.
- Participants learned how to leverage the skills and knowledge of each team member while
making collective decisions.

Conclusion
The experiential learning session for international finance and financial markets included a
virtual live trading simulation that was incredibly helpful. It provided us with useful knowledge
of risk management, centralized banking, negotiation strategies, and the financial markets.
Along with being academically stimulating, these concepts are very practical in real-world
financial professions.
We now have a better understanding of how to operate in this dynamic environment as a result
of our simulation's in-depth understanding of the complexity of global banking and financial
markets.
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 TERM SHEET
Dear sir,
With respect to your expected import contract which is yet to be done we will be happy to
help you with the following terms and conditions as mentioned under.

Bank Universal Bank

Counter Party Affinity Trading
Trade Type Currency Forward
Trade Date 26th September 2023
Amount Sold by UBS INR 2,05,000,000
Amount Bought by UBS USD 10,000,000
Foreign Exchange Rate 20.50/22.50
Value Date 26th September 2023
Settlement Date 27th November 2023

Forward Rate 6.92%

On the Value Date, independent of the ongoing USD/INR exchange rate, below mentioned
payoff would happen under the Transaction:
Settlement on 27th November 2023
UBS would Receive USD 10,000,000 from Counterparty
UBS would Pay INR INR 2,05,000,000 to Counterparty

Risks Associated:

• Tenor Of Transaction: Counterparty should be satisfied with the entire tenor of the
Transaction. Counterparty should note that any transaction with a longer tenor will be
associated with higher risks and usually involve higher cost of early termination if early
termination is permitted.

• Counterparty Suitability: Counterparty should ensure that they understand the

characteristics of the Transaction and the nature of the risks associated therein and
that they consider the suitability of the Transaction in the light of their own
circumstances and financial condition and that they have the ability to enter into the
Transaction as well as withstand the potential financial loss.

• Bank’s Hedging Activities May Affect Interest And Exchange Rates: The Bank and/or
its affiliates may enter into hedging transactions in the market to enable the Bank to
fulfil its obligations under the Transaction. These hedging transactions may affect the
relevant interest and/or exchange rates.
 • Liquidity Risk: The Transaction is a contractual obligation by the Counterparty from
the trade date to the maturity or termination date. No early uplift, withdrawal,
modification or termination of the Transaction is permitted except with the Bank’s
prior agreement or otherwise provided under the Transaction. If the Transaction is
early terminated or modified, the Counterparty may suffer losses and will have to
compensate the Bank for costs (if any) incurred by the Bank in replacing or obtaining
the economic equivalent of the Transaction as a result of a modification or early
termination requested by the Counterparty and such losses and costs may be
substantial.

Disclaimer:

This term sheet is not legally binding and serves as a preliminary agreement between Price
Taker I and Universal Bank. The actual transaction will be subject to the execution of a formal
currency exchange contract, compliance with applicable regulations, and other relevant
terms and conditions.

Authorized Signature

_________________