International Finance & Trade

Program

: MBA

Class of

: 2011

Credit

: 3

Sessions

: 33

Course Code : SL FI 602

Objective
This course exposes students to global financial markets, instruments and various strategies of hedging. The
quantitative tools covered in this course make students competent to understand the transactions of a dealing room
and help in grooming their negotiating skills in the international markets. The course also gives emphasis on
international economics, international trade, financing foreign trade and various intricacies connected therewith.
REFERENCE BOOKS

AUTHOR / PUBLICATION

Multinational Finance Management

Alan.Shapiro, 8 Ed, Wiley Publishers

International Finance & Trade

IUP

International Financial Management

Apte, P G. ICFAI

International Financial Management

Shapiro, Alan C. Prentice-Hall, India

International Finance, 5th e

Levi, Maurice D. Routledge - 2009

th

Multinational Finance, 5 e

Buckley, Adrian. Financial Times Management

- 2003

International Money and Finance, 7th e

Melvin, Michael. Addison Wesley - 2003

International Business Finance

Vihang R Erremza, Devi Singh &T. Srinivasan

- Global Business Press

International Finance Theory & Practice

Avadhani, V A. Himalaya Publishing House 2000

International Financial Management

Charley N Henning, Willan Pigott, Robert

Haney Scott - McGraw-Hill

International Financial Institutions

A F P Bakker Longman

Detailed Syllabus
Financial Management in a Global Perspective: Increasing Interdependence in the Global Economy - Trends in
International Trade and Cross Border Financial Flows - India in the Global Economy - Recent Developments in
Global Financial Markets - Liberalization - Integration and Innovation - Challenges of International Financial
Management - Gains from International Trade and Investment.
International Monetary System and Financial Markets - An Overview: Balance of Payments - International
Monetary System - An Overview of International Financial Markets - Exchange Rate Determination and
Forecasting.
International Trade Theories: Theory of Absolute Advantage - Theory of Comparative Advantage - HeckscherOhlin Model - Imitation-Gap Theory - International Product Life Cycle Theory.
Trading Blocks: Formation of Trading Blocks - Conditions for Success - OPEC - Its objectives - Functions European Community (EC) - Functioning of EC - India and EC - The North America Free Trade Agreement
(NAFTA) - Its objectives - UNCTAD- Its functions.
GATT: Trade Negotiations under GATT - Uruguay Round - Important Aspects of Market Access in the Uruguay
Round - Subsequent WTO Developments.

WTO: History - Functions - Structure - WTO Agreements - Trade Related Aspects of Intellectual Property Rights
(TRIPS) - Trade Related Aspects of Investment Measures (TRIMS) - General Agreement on Trade in Services
(GATS).
The Foreign Exchange Market: Structure and the Participants - Types of Transactions - Mechanics of Currency
Dealing - Exchange Rate Quotations - Arbitrage - Forward Rates - Evolution of Exchange Control and the Foreign
Exchange Market in India - Exchange Rate Computations.
The Links between the Forex Market and the Money Market: Covered Interest Arbitrage - Covered Interest
Parity Theorem - Swap Margins and Interest Rate Differentials - Option Forwards - Cancellation of Forward
Contracts - Forward-forward Swaps - Short Dated and Broken Date Contracts.
Nature and Measurement of Exposure and Risk: Macroeconomic Risks and Corporate Performance - Defining
Foreign Exchange Exposure - Measuring Foreign Exchange Exposure - Conceptual Approach - Classification of
Foreign Exchange Exposure - Transactions Exposure - Translation Exposure - Operating Exposure - Exposure and
Risk, Risk as Variability of Cash Flows.
Managing Transactions Exposure: The Hedging Decision - Automatic vs Discretionary Hedging - Cost of Forward
Hedge - Choice of Currency of Invoicing - Internal Hedging Strategies : Leads - Lags - Netting - Offsetting External Hedging : Forwards - Money Market Hedge - Hedging Contingent Exposures an Exposures with Uncertain
Timing.
Operating Exposure: Operating Exposure - Purchasing Power Parity and Real Exchange Rates - Determinants of
Operating Exposure - Operating Exposure for Exporters and Importers - Assessing and Coping with Operating
Exposure.
Short Term Financial Management in a Multinational Context: Short Term Funding & Investment - Centralized
vs. Decentralized Cash Management - Netting - Pooling - Exposure Management - Offshore Invoicing Centers.
International Equity Investment: Comparing Domestic Versus Foreign Equity Investment - Gains from Crossborder Diversification - International CAPM - The Depository Receipts Mechanism.
Long Term Borrowing in International Capital Markets: The Costs and Risks of Foreign Currency Borrowing Syndicated Loans - Bond Issues - MTNs - NIFS and Related Instruments - Project Finance - Country Risk
Assessment.
International Project Appraisal: The Difficulties in Appraising a Foreign Project - Issues in Cost of Capital - The
Adjusted Present Value Approach - The APV Approach for a Foreign Project - Choice of Discount Rates.
International Accounting & Taxation: Accounting for Forex Transactions & Derivatives - Transfer Pricing Consolidation of MNCs Accounts International Taxation.
EXIM Policy: Historical Perspective-Objectives - Highlights of the Current Policy - Imports - Classification-Import
Licences -Exports - Export Promotion Capital Goods Scheme (EPCG) - Other Guidelines.
Letters of Credit: Types of L/Cs - Mechanics of an L/C - Import Letters of Credit - Requirements for Opening an
Import Letter of Credit - Operational Features of an Import L/C - Documentation Formalities - Bill of Lading Scrutiny of Documents Required Under an Import L/C - Other Relevant Guidelines - Role of Customs/C&F Agents
- Reporting System.
Uniform Customs and Practice for Documentary Credits 1993 Revision - Rules: Introduction to International
Chamber of Commerce - Introduction to UCPDC - Description of Articles - Applications of Articles.
ICC Uniform Rules for Collection: Collection Rules - Role of Drawer - Collecting Banker - Paying Banker.
Export Finance and Exchange Regulations: Incentives Available to Exporters - Preshipment Finance - Post
Shipment Finance - Rediscounting of Export Bills Abroad - Preshipment Credit in Foreign Currency (PCFC) - Other
Exchange Control Regulations - Declaration Forms - GR/PP Procedure - Export Letters of Credit - Documents to be
Presented under an Export Letter of Credit - Guidelines for Scrutiny of Documents Presented under Letter of Credit
- Reporting System - Role of ECGC and its Functions.
Import Regulations: Classification - Imports under Foreign Credits/Loans - Postal imports - Other Exchange
Control Regulations - Merchant Trade - FEMA- Forward Exchange Contracts for Imports.

Current Developments
Cases
Gazprom Naftogaz Ukrainy Dispute: Business or Politics?
Mercosur Changing Course?
The Falling Dollar
The Chinese Yuan: The Revaluation Dilemma
Source: Case Studies in Finance Volume III

Suggested Schedule of Session

Topic

No. of Sessions

Financial Management in a Global Perspective

International Monetary System and Financial Markets - An Overview

International Trade Theories

Trading Blocks

GATT and WTO

The Foreign Exchange Market

The Links between the Forex Market and the Money Market

Nature and Measurement of Exposure and Risk

Managing Transactions Exposure

Operating Exposure

Short Term Financial Management in a Multinational Context

International Equity Investment

Long Term Borrowing in International Capital Markets

International Project Appraisal

International Accounting & Taxation

EXIM Policy

Letters of Credit

Uniform Customs and Practice for Documentary Credits 1993 Revision-Rules, ICC
Uniform Rules for collection

Export Finance and Exchange Regulations, Imports and Exchange Regulations

Import regulations and Current Developments

Total

33