international investments and capital flows. . and how these affect international trade. foreign investment. It also studies international projects.€ € € International finance is the branch of economics that studies the dynamics of exchange rates. It includes the study of futures. International finance is a branch of international economics. and trade deficits. options and currency swaps.

.€ € € Helps in taking financial decisions in the area of international business. International Finance Management suggests the most suitable technique to be applied at a particular moment and in a particular case in order to hedge the risk. In fact. The movement of funds mostly to the developing world and the reverse movement of funds in form of interest and amortization payments needed proper management.

Political risk € Financial risk € Economic risk € Country risk € Market risk € Exchange rate risk € Operational risk € Legal risk € .

The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. € There are three kinds of gold standard: € ¾ The gold specie standard. ¾ The gold exchange standard. ¾ The gold bullion standard .

Nixon finally broke the Bretton Woods agreement. € After 1971 the dollar was fixed not to an ounce of gold.In August 1971. and refused to redeem dollars for gold. € As a result Currencies floated up and down against the dollar. It was fixed only to the printing press of the Treasury and Federal Reserve. something measurable. € .

A market-driven price for currency. € There is automatic correction in the floating exchange rate as the country simply lets it move freely to the equilibrium of demand and supply. € . whereby the exchange rate is determined entirely by the free market forces of demand and supply of currencies with no government intervention.

€ . The free movement of demand and supply helps to insulate the domestic economy from world economic fluctuations. Governments are free to choose their domestic policy as a floating exchange rate would allow for automatic correction of any balance of payment disequilibrium that might arise from the implementation of domestic policy.€ There is insulation from external economic events as the country's currency is not tied to a possibly high world inflation rate as is under a fixed exchange rate.

. and they state a level at which the exchange rate will stay. The government takes whatever measures that are necessary to maintain the rate and prevent it from fluctuating.€ € € The government is unwilling to let the country's currency float freely. a fixed exchange rate and a pegged exchange rate. There are two methods which exchange rate could be applied to the price of currencies.

€ A fixed exchange rate contradicts the objective of having free markets and it is not able to adjust to shocks swiftly like the floating exchange rate. .

Presented By Fakhruddin Godhrawala Abi Abraham .

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