MBA 4th Semester Syllabus

1. 4.2.2 INTERNATIONAL FINANCIAL MANAGEMENT
1. GENERAL INFORMATION
No. of Credits per week 4
No. of Hours per week 4
2. PERSPECTIVE OF THE COURSE
A business enterprise having international transactions is exposed to various risks. While
understanding the global environment, the economic impact of the transactions, the
procedures and formalities to be adhered to are on one side, the impact of transactions on
cash flow of the entity on account of fluctuations in foreign exchange rate is another aspect
that must be addressed. This course titled “International Financial Management” aims to
orient all the aspects a professional need to know in carrying out international transactions.
3. COURSE OBJECTIVES AND OUTCOMES
OBJECTIVES
- To orient the students on global business environment and international markets.
- To make students understand the various risks an enterprise is exposed to on
account of international transactions.
- To provide knowledge and skills for hedging foreign currency risks.
OUTCOMES
By the end of this course, a student would learn
- The global financial environment, currency system, relationship between
economies and impact of international transactions on the economy.
- Functioning of international financial markets.
- Fixing of exchange rate.
- Foreign currency risks and hedging strategies.
- Interest rate risks and hedging strategies

2. 4. COURSE CONTENT AND STRUCTURE
1
MODULE 1: GLOBAL FINANCIAL MANAGEMENT 10 HOURS
Evolution of International Monetary System, Bimetallism, Classical Gold Standard,
Interwar Period, Bretton Woods System, Flexible Exchange Rate Regime, The current
Exchange Rate Agreements, European Monetary System, Fixed vs. Flexible Exchange
Rate Regime
2
MODULE 2: BALANCE OF PAYMENTS 5 HOURS
Introduction, Accounting Principles in Balance of Payments, Valuation and Timing,
Components of the Balance of Payments, ‘Surplus’ and ‘Deficit’ in Balance of Payments,
Importance and limitations of BOP Statistics, Relationship of BOP with other economic
variables.
3
MODULE 3: INTERNATIONAL FINANCIAL MARKETS5 HOURS
Motives for using International Financial Markets. Foreign Exchange Market – History
and Transactions, interpreting Foreign Exchange Quotations, International Money
Markets, International Credit Markets and International Bond Markets. Comparison of
International Financial Markets.
4
MODULE 4: EXCHANGE RATE DETERMINATION 8 HOURS
Purchasing Power Parity Theory, Interest Rate Parity Theory, International Fischer’s
Effect, Pure Expectations Theory
5
MODULE 5: FOREIGN EXCHANGE RISK AND RISK HEDGING STRATEGIES18 HOURS
Transaction Risk, Translation Risk, Economic Risk. Risk Hedging Strategies: Internal –
Netting, Leads and Lags. External – Forwards, Futures, Options, Money-market Hedging,
Currency Swaps
6
MODULE 6: INTEREST RATE RISK AND RISK HEDGING STRATEGIES10 HOURS

3. Interest Rate Swaps, Forward Rate Agreements, Interest Rate Futures, Interest Rate
Options, Caps, Floors and Collars, Swaption.
5. PEDAGOGY
a) Lectures.
b) Demonstrations using Excel
c) Practical Exercises – Individual and Group
d) Case Studies.
6. TEACHING/LEARNING RESOURCES
ESSENTIAL READINGS
1. Alan Shapiro: Multinational Financial Management , Prentice Hall, New Delhi.
2. Apte, Prakash, “International Finance – A Business Perspective”, Tata McGraw Hill.
3. David B. Zenoff& Jack Zwick: International Financial Management.
4. Rita M. Rodriguez L. Bigame Carter: International Financial Management.
5. V. A. Avadhani: International Finance- Theory and Practice, Himalaya Publishing
House.
REFERENCES
1. Madura, Jeff, “International Corporate Finance”, Thomson South-Western.
2. Sharan, Vyuptakesh, “International Financial Management”, Prentice Hall of India.
3. Jain, Peyrard, and Yadav’ “International Financial Management”, MacMillan
4. J. Fred Weston, Bart: Guide to International Financial Management.
5. Robery O. Edmister: Financial Institutions - markets and Management.
6. A.V. Rajwade: Foreign Exchange International Finance and Risk Management,
Prentice Hall.