International Finance & Trade

Program Credit Course Code : PGPM : 3 : SL FI 602 Class of Sessions : 2012 : 30

Learning Objective 1. 2. 3. 4. 5. To enable students to appreciate the logic of why and how international trade takes place. To provide an understanding of global monetary system that facilitates international capital flows and settlement. To make students competent to understand the transactions of a dealing room and help in grooming their negotiating skills in the international markets. To learn how to measure and manage exchange risk. To gain understanding on how international trade policies and facilitation in India, along with import and export financing process.

Learning Outcomes 1. 2. 3. 4. 5. 6. To identify business opportunities, using various trade theories, and critique trade policies of host countries To discuss how forex market function and mechanisms of forex transactions, and factors affecting exchange rate To measure forex exposure of a firm and its implications for firms value To decide market to raise long term funds and destination countries for foreign investment. To assess cash requirements of subsidiaries and to consolidate financial statements of subsidiary firms. To explain Indias foreign trade policy and negotiate documentary credits

REFERENCE MATERIAL(S): International Finance and Trade* International Economics International Economics IUP Thomas A Pugel and Peter H. Lindert, McGraw Hill W. Charles Sawyer and Richard L Sprinkle, PrenticeHall Ephraim Clark by Thomson Prakash G. Apte, , Tata McGraw Hill

International Finance International Finance

There is hardly any single book addresses both trade and finance issues

Detailed Syllabus Financial Management in a Global Perspective: Increasing Interdependence in the Global Economy Trends in International Trade and Cross Border Financial Flows - - Recent Developments in Global

Financial Markets - Challenges of International Financial Management International Trade Theories: Theory of Absolute Advantage - Theory of Comparative Advantage Heckscher-Ohlin Model - Imitation-Gap Theory -

International Product Life Cycle Theory. Protectionist measures and artificial promotion of exports by countries Trading Blocks: Various Forms of economic integration, Formation of Trading Blocks Conditions for Success WTO: Trade Negotiations under GATT, Functions and Structure of WTO, WTO Agreements, Trade facilitation by WTO International Monetary System and Financial Markets: Balance of Payments - International Monetary System Different Exchange Rate regimes. 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. Types of Contracts forward, futures, options, swaps, Cancellation of Contracts Determination of exchange rate : Purchasing Power Parity, Interest Rate Parity Links between the Forex Market and Money Market: Covered Interest Arbitrage - Covered Interest Parity Theorem - Swap Margins and Interest Rate Differentials - Option Forwards Forex Exposure and Risk: Defining and Measuring Foreign Exchange Exposure Classification of Foreign Exchange Exposure and their management - Transactions Exposure Translation Exposure - Operating Exposure . Hedging practices Short Term Financial Management in a Multinational Context: Short Term Funding Centralized vs. Decentralized Cash Management Choice of Discount Rates. International Equity Investment: Comparing Domestic Versus Foreign Equity Investment - Gains from Cross-border Diversification - International CAPM -. Raising Long Term fund from International Capital Markets: The Depository Receipts Mechanism; The Costs and Risks of Foreign Currency Borrowing Process involved in rasiing of long term funds

International Project Appraisal: The Difficulties in Appraising a Foreign Project - Issues in Cost of Capital - The Adjusted Present Value Approach International Accounting & Taxation: Accounting for Forex Transactions & Derivatives - Transfer Pricing - Consolidation of MNCs Accounts International Financial Reporting System Foreign Trade Policy of India: Historical Perspective Objectives and Major Highlights of the Current Policy - Export promotion measures. Letters of Credit: Types of L/Cs - Mechanics of an L/C - 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 600 - Introduction to - Description and 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. Cases: 1. 2. 3. 4. 5. 6. 7. 8. 9. Comparative Cost Advantage and the American Outsourcing Backlash Cancun Revisited NAFTA Achievements and Challenges Yuan: To Peg or Not to Peg? Americas Dollar Policy: Weak Dollar vs Strong Dollar European Trade with China Chinas FDIs in Asia Transfer Pricing Currency Risk Management Automobile Industry

Suggested Schedule of Sessions Topic Financial Management in a Global Perspective International Trade Theories Trading Blocks Trade facilitation by WTO International Monetary System and Financial Markets Foreign Exchange Market Determination of exchange rate Links between the Forex Market and the Money Market Forex Exposure and Risk Short Term Financial Management in a Multinational Context International Equity Investment Raising Long Term Funds from International Capital Markets International Project Appraisal International Accounting & Taxation Foreign Trade Policy of India Letters of Credit Uniform Customs and Practice for Documentary Credits 600 Uniform Rules for collection Export Finance and Exchange Regulations, Imports and Exchange Regulations Total No. of Sessions 1 2 2 2 2 5 2 2 3 1 1 1 1 1 1 1 1 1 1 30