Module Plan International Finance Management

International Financial Management
PGDM Class of 2019-20

Term V
3 credit-30hours
Module Leader: Ms. Sadhna Gaur
Email: sadhna.gaur@iilm.edu
Cabin No: 221
Course Focus: What are we aiming at?
Most finance courses and textbooks implicitly assume that firms operate in only a single country
and that differences between countries are irrelevant. However, since the end of World War II,
the foreign activities of firms have grown substantially, and this growth, if anything, appears to
be accelerating. Firms of all types and sizes now face decisions about how to best obtain and
deploy resources abroad. Furthermore, significant differences between countries have persisted,
and these give rise to considerable variation in the prevalence of market imperfections. As a
consequence, basic financial decisions now involve cross-border complexities. Choices about
raising capital, investment, risk management, acquisition activity, restructuring, and other
aspects of financial policy typically involve international considerations. When making these
choices, managers must analyze exchange rates, differences in tax rules, country risk factors, and
variation in legal regimes. This course provides the foundations for learning how finance works
in this rich cross-border setting.
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Course Objectives:
This Subject is designed to familiarize students with international financial transactions and
Operational aspects of foreign exchange markets. It focuses on forex market participants,
exchange rates determination, international arbitrage, foreign exchange risks and its management
and international capital market. It enables students to understand the crux of international
financial market.
On successful completion of this module students will be able to:
 Will able to make quantified foreign currency management decisions;

 Determination of exchange rates, and their relationship with interest rates and inflation
 Different types of foreign exchange risks faced by the MNC have acquired a knowledge
and understanding of how investment and financing decisions are made by firms that
trade internationally,
 Consequences of misalignment of exchange rates.
 The structure of international financial markets and institutions.
Why should you do this course?
This Subject is designed to familiarize students with international financial transactions and
Operational aspects of foreign exchange markets. It focuses on forex market participants,
exchange rates determination, international arbitrage, foreign exchange risks and its management
and international capital market. It enables students to understand the crux of international
financial market
https://nptel.ac.in/syllabus/110105031/
Profiles:
Profile: Research Associates, Research Analyst, Finance Executives in Financial Services and
Manufacturing.
Sector: Financial services, Banking, Manufacturing
2
Team Membership:
The team for group projects will comprise of a minimum of 2 and maximum of 3 members for
both the group activity as well as presentation/ viva. To ensure that each member of the group
contributes in the group project/assignment, peer feedback will be incorporated in the assessment
of the project.
Module Pre-Requisites:
Finance 1 and Finance 2 (Corporate Finance), Investment Analysis and portfolio management
Preparing for the class:
We believe in learning through participation so

a) Learning through class discussion and dialogue helps in achieving the objective of this
module.
b) Peer learning contributes in the overall learning in the classroom. The concepts are delivered
using live examples so it involves a lot of calculation and problem solving exercises.
The course outline has detailed session plan which includes readings and cases. You are required
to come prepared by going through the material already uploaded on Fee bank. The quality of
discussion will contribute the overall achievement of programme level goals. It is essential that
the student has a thorough understanding of concepts in Corporate Finance, Investor and
Financial Ratio Analysis.
3
Module Overview (Session wise)

Session No. Topic
Session 1-3 International Financial Environment, Gold Standard,

Bretton Wood System.
Session 4 International Institutions (IMF, WTO, World Bank)
Session 5 BOP, BOT, EXIM.
Session 6-8 Foreign Exchange Market: (theories)
Session 9-11 Foreign Exchange Quotations: Bid-Ask Spread, Forward

Rates, Cross rates.
Session 12 International Trade & Risk Associated with International
Trade
Session 13-18 Foreign Exchange Exposures: Transaction, Translational,
Operational Exposure: Assessment and Management
Session 19 Mid –Term viva

Session 20 International Perspective of Capital Structure, Cost of
Capital, Capital Budgeting.
Session 21 International Equity Market and Cross Listing of Shares
Session 22 International Equity Market and Indian ADRs and GDRs
Session 23 Evaluation of Foreign Direct Investment
Session 24 End Term
Assignments due Dates and Times
Date of submission Assignment Nature of Assignment
November, 2019 Class assessment Individual, Verbal

(2+2+1=5marks)
4
December, 2019 Group Viva Effect of currency market on

(3+7 marks) exchange rates.
January, 2020 Term End Closed Individual, written

Book Exam (15 marks)
Details of Assessment Component:

Assessment 1: Class assessment
There will be class assessment randomly carrying 2+2+1 Marks on individual basis. The assessment
would be based on current or few previous class lecture or case let based discussion. The assessment
has to be submitted at the end of the class.
Assessment 2: Group Project and Viva
The project’s purpose is to provide the students with an opportunity to integrate and apply the
content that they learn in the class. Each group consisting of 2/ 3 students will have to prepare a
detailed project report on any one event ie economic crisis/financial crices / world currency events
and analyse its effect on exchange rate. The deadline of the report will be communicated to the
students followed by viva. The report will carry 3 marks followed by 7 marks of the viva.
Assessment 3: End Term Exam
This would be a 1.15 hours closed book written assessment held at the conclusion of the course.
The purpose of the assessment is to test students' theoretical and critical understanding through
questions/ caselets and their ability to apply various concepts to situation based problems.
Feedback on students' performance will be provided when answer scripts are shown to students.
The examination will carry 15 marks.
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Assessment Rubrics
Grade A B C D E F
5 4 3 2 1 0
Excellent Very Good Pass Unsatisfactory Fail
Good
Assessment Map
Methods of Assessment
Module A1 A2 A3 A4 A5
* * * * *
A1- Individual assignment/case study

A2- Group assignment/ project/business plan
A3- Open book examinations/ case study
A4- Closed book examinations
A5- Group Presentations
Teaching Map
Teaching Map
Module T1 T2 T3 T4 T5 T6 T7 T8
* * *
T1- Lectures
T2- Seminars/Tutorials
T3- Live projects/presentations
T4- Case study
T5- Guest Lectures
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T6- Industrial Visits/Simulations

T7- Online activities
Curriculum Map
Programmed Learning Outcomes
Module L1 L2 L3 L4 L5 L6 L7
* * * * * *
L1- An understanding of organizations, their external context and their management.
L2- An understanding of appropriate management techniques to allow investigation into business

and management issues.
L3-The ability to acquire, analyze and understand data and information.
L4-Critical thinking and informed judgment leading to problem-solving and decision making
skills.
L5-Cognitive flexibility which enables adaptability to uncertainty in a rapidly changing world.
L6-An understanding of disruptive and technological change and the ability to seek innovative
and entrepreneurial solutions.
L7- Be able to effectively communicate and negotiate.
.
Module Readings:
https://nptel.ac.in/courses/110105057/
https://www.edx.org/course/foreign-exchange-market-concepts-instruments-risks-and-
derivatives
Main Texts
 Madura, Jeff. ( 13 th edition) International Financial Management. Cengage publication
 Apte, P.G., (7th edition) International Financial Management Tata McGraw Hill
Education Private Limited, 2008
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Detailed Session Schedule
Session 1-3: International Financial Environment, Gold Standard, Bretton Wood System.
The topic covered primarily in the area of international financial environment. Session one will
be devoted to this area. Here, discussion will be about how the international financial
environment over the year developed, how the trade liberalization, financial sector liberalization
has given a importance to international trade and investment.
Session will also be discussing international monetary system. Here we will discuss the gold
standard. And finally the evolution of Bretton wood system.
Learning Outcomes:
1. Overview of internal environment
2. Knowing Gold standard
3. Emergence of Bretton wood system.
Desired Reading: http://ejf.wdfiles.com/local--

files/finman9/International%20Financial%20Management%20Jeff%20Madura.pdf
Desired Videos: https://nptel.ac.in/courses/110105057/1
Session 4: International Institutions (IMF, WTO, World Bank)
In this session will be discussing on world trade organisation. Here you have to discuss how the
world trade organisation has helped in developing the world economy, what are the issues are
there in world trade organisation, how developing country or developed country they negotiate
for the world trade and what are the challenges are there at present with the world trade
organisation. The session would also be talking about IMF and its role in enhancing international
trade.
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Learning Outcomes:
1. Role of IMF
2. Role of WTO
3. Role of World Bank.

https://nptel.ac.in/courses/110105057/34
Session 5: BOP, BOT, EXIM.
The session will talk about the Balance of Payment, Balance of Trade, Exim bank. Students will
learn to prepare the BOP, BOT and to critically analyse the current BOP, and its relevance in the
economic environment.
Learning Outcomes:
1. Knowing BOP, BOT.
2. Learning to prepare BOP.
Session 6-8: Foreign Exchange Market (theories)
Session will be discussing about floating and fixed exchange rate regime, about exchange rate,
floating and fixed exchange rate, exchange rate basket system, and also exchange rate, exchange
rate currency board system. Session will talk about the features of foreign exchange market. Will
be discussing about how the foreign exchange market operate. What are, who are the participant
in the foreign exchange market, and how the foreign exchange market over different countries
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have developed, and foreign exchange market how the foreign exchange quotation take place,
how the participant take position in the foreign exchange market, why different exchange rate are
there for different requirements.
Learning Outcomes:
1. Exchange rate determination Process.
2. Player in the market.
3. Strategies of the players in forex market.

Desired Videos:
Session 9-11: Foreign Exchange Quotations: Bid-Ask Spread, forward rates, Cross rates.
Session will be discussing about exchange rate arithmetic. Session will discussing, how
exchange rate; that is currency exchange among different currency take place, how the exchange
rate determination take place, how the forward exchange rate calculation we do in the market.
Actually, we will be discussing actual market phenomenon, and how exchange rate among
different currency, we determine by the buying and selling of foreign currency, how the brokers,
the banks, the participant in the exchange rate market, decide the exchange rate value.
Learning Outcomes:
1. Learn to determine cross rates.
2. Learn to calculate forward rate.
3. Bid and ask for different stakeholders.
4. Learn to quote rate by the bank.

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Session 12: International Trade & Risk Associated with International Trade
This session will talk about foreign exchange exposure, difference between exposure and risk,
exposure when there is volatility in foreign currency market to create exposure. It is a risk when
exposure are crystallize. Session will be discussing about international trade theory. The session
will discuss about the relative Heckscher-Ohlin theorem. Factors, hampering the trade barrier,
and how we can improve the international trade by removing the trade barriers.
Learning Outcomes:
1. Learn the difference between risk and Exposure
2. Types of Exposure.
3. Theorems to risk.

Session 13-18: Foreign Exchange Exposures: Transaction, Translational, Operational

Exposures: Assessment and Management
Session will be discussing about international financial integration, with reference to

international financial trade. Session will be devoted to international financial transaction, that is
how the international financial corporate sector, primarily the big corporate MNC, how they
prepare their balance sheet where they have exposure to international different countries. Session
will focus on foreign exchange exposure. The idea for the session is risk assessment and its
11
minimization. This session will talk about the Transaction, Translational and Operational
Exposure, arising out of exchange rate fluctuation in the form of transaction exposure, may be in
the form of operating exposure, and may also be in the form of translation exposure and how
wean manage the transaction exposure.
Learning Outcomes:
1. Knowing all three risk exposure from MNC point of View.
2. Assessing and minimizing the international risk.

Session 19: Mid –Term viva
Learning Outcomes: Session will be conduction Viva in the mid-term assessment to evaluate
the understanding of the concept taught in previous classes. The students are asked to prepare a
project report on any financial or economic crises with respect to exchange rate fluctuations. The
project report submission will be followed by a viva of the group. This assessment is for 10
marks.
Desired Reading: All the session taught before mid-term.

Desired Videos: All
Session 21: International Equity Market and Cross Listing of Shares
Session will be discussing about cross listing of shares and depository receipt. Here, we will
discuss how the financial sector liberalisation in India and many other developing country, along
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the domestic company to cross list their share in different exchanges all over the world.
Discussion is about how the investor have try to expose or try to get the benefit of cross listing of
share through different kind of arbitrage opportunity.
Learning Outcomes:
1. Learn Cross Listing
2. Learn International Equity Market

Session 22: International Equity Market and Indian ADRs and GDRs
: In Continuation to the previous topic the session will discuss the process of development of
GDR, , American depository receipt (ADR) and also we will discuss how the cross listing
increases the valuation of the company, investor trying to expose or try to get the benefit of
cross listing of share through to different kind of arbitrage opportunity
Learning Outcomes:
1. Listing up of ADRs and GDRs
2. Advantages of these instruments for MNC.
Session 20: International perspective of Capital Structure, Cost of Capital, Capital

Budgeting
The session will cover international capital structure, Cost of Capital, Capital Budgeting. MNC’s
finance capital budgeting how to take decision about long term investment, which cash flows are
13
spread over a long period and initial investment will be huge in nature. So, initially you are
spending lots of money and the returns are coming over the periods, without evaluating the
project, you cannot go for a long term investment or in the form of capital
budgeting.International capital structure and the capital asset pricing model. This primarily a part
of corporate finance and integration of foreign exchange in corporate finance. This international
capital asset pricing model we generally call it as international corporate, corporate finance,
where the capital or capital structure of company generally influenced by their diversification of
capital structure. Diversification here means, they are sourcing their capital from different
countries in foreign, in foreign exchange
Learning Outcomes:
1. Knowing International Capital Structure
2. Knowing International Cost of Capital
3. Knowing International Capital Budgeting.
4. Effect of these on the Balance sheet of MNC.

Session 23: Evaluation of Foreign Direct Investment
The session is on foreign direct investment. What is the positive negative aspect of foreign direct
investment, and how we can evaluate foreign direct investment using the project evaluation
methods particularly the NPV and IRR method. The session also discusses the the difference
between foreign direct investment and foreign portfolio investment. How foreign direct
investment is good for the country comparing to foreign portfolio investment, and what are the
positive and negative aspect of foreign direct investment, and end of this session we will be
discussing about the evaluation aspect of foreign direct investment using a practical example.
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Learning Outcomes:
1. Learning of FDI
2. Difference methods to FDI
3. Effects of FDI on MNC.
Session 24: End Term
Learning Outcomes: Session will be conduct a written individual exam to evaluate the
understanding of the concept taught in the course of module. It would be a critical analytical
based assessment. This assessment is for 15 marks.
Desired Reading: All the session taught and reading Material provided on Feebank.
Desired Videos: All videos referred and shared during discussions.
15

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International Financial Management

International Financial Management

PGDM Class of 2019-20

Course Focus: What are we aiming at?

 Will able to make quantified foreign currency management decisions;

Why should you do this course?

Preparing for the class:

We believe in learning through participation so

Module Overview (Session wise)

Session 1-3 International Financial Environment, Gold Standard,

Session 5 BOP, BOT, EXIM.

Session 6-8 Foreign Exchange Market: (theories)

Session 9-11 Foreign Exchange Quotations: Bid-Ask Spread, Forward

Session 19 Mid –Term viva

Assignments due Dates and Times

Date of submission Assignment Nature of Assignment

November, 2019 Class assessment Individual, Verbal

December, 2019 Group Viva Effect of currency market on

January, 2020 Term End Closed Individual, written

Details of Assessment Component:

Assessment 2: Group Project and Viva

Assessment 3: End Term Exam

A1- Individual assignment/case study

T6- Industrial Visits/Simulations

Programmed Learning Outcomes

L1- An understanding of organizations, their external context and their management.

L2- An understanding of appropriate management techniques to allow investigation into business

L3-The ability to acquire, analyze and understand data and information.

L5-Cognitive flexibility which enables adaptability to uncertainty in a rapidly changing world.

L7- Be able to effectively communicate and negotiate.

Detailed Session Schedule

Desired Reading: http://ejf.wdfiles.com/local--

Desired Videos: https://nptel.ac.in/courses/110105057/1

Session 4: International Institutions (IMF, WTO, World Bank)

Desired Reading: http://ejf.wdfiles.com/local--

Session 5: BOP, BOT, EXIM.

Session 6-8: Foreign Exchange Market (theories)

Desired Reading: http://ejf.wdfiles.com/local--

Desired Reading: http://ejf.wdfiles.com/local--

Desired Videos: https://nptel.ac.in/courses/110105057/9

Desired Reading: http://ejf.wdfiles.com/local--

Session 13-18: Foreign Exchange Exposures: Transaction, Translational, Operational

Session will be discussing about international financial integration, with reference to

Desired Reading: http://ejf.wdfiles.com/local--

Session 19: Mid –Term viva

Desired Reading: All the session taught before mid-term.

Session 21: International Equity Market and Cross Listing of Shares

Desired Reading: http://ejf.wdfiles.com/local--

Session 20: International perspective of Capital Structure, Cost of Capital, Capital

Desired Reading: http://ejf.wdfiles.com/local--

Session 23: Evaluation of Foreign Direct Investment

Session 24: End Term

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