Indian Institute of Management Rohtak

Course Outline

Course Title : International Finance

Credits : 3
Type : Elective
Session Duration : 75 minutes
Term : VI
Year : 2017
Faculty : Subbarao V. Jayanti
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Introduction
The objective of this course is to provide an insight into various issues and challenges
faced by managers of multinational corporations. Changes in the world environment are
bringing new opportunities and threats to businesses. As markets become more globally
integrated, foreign markets will have more influence on corporate performance. The
challenge is to compete successfully in the dynamic global marketplace. To accomplish
this task, we examine various topics related to the international financial environment.
The topics include exchange rates, currency risk management, asset and liability
management in the short-term and long-term, and country risk management.

Course Objectives
1) Understand the economic determinants of foreign exchange rates;
2) Recognize the relationship among interest rate, inflation rate and foreign exchange rate in
the spot and futures markets;
3) Measure the risk generated by foreign exchange exposures;
4) Examine the appropriate hedging techniques to reduce exposure to exchange rate risk;
5) Understand the economics and decision factors in international operations, financing and
investments.

Pedagogy
The pedagogy includes a mix of Lectures, Discussion, Case Analysis, and Quizzes.
We will also discuss recent events related to International Finance from Financial
newspapers.

Evaluation Scheme
Quizzes 20%
Case Analysis & Presentation 20%
Exam 1 30%
Final Exam 30%

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Case Analysis & Presentation:

You have to form groups of 5 members. Each group will be assigned a Case. You have to
submit a written (typed) report on the case. You will also present the Case to the
class. The presentation will be of 15 minute duration. The grade will be based on
both written report and presentation.

Brief Outline
1. The International Financial Environment
2. Exchange Rate Behavior
3. Exchange Rate Risk Management
4. Long-Term Asset and Liability Management
5. Short-Term Asset and Liability Management

Text Book
International Finance by Eun, Cheol and Bruce Resnick

Reference Books (Supplementary Readings)

1. Desai, Mihir A. (2007), International Finance: A Case Book, John Wiley & Sons, Inc.
2. Alan C. Shapiro, (2009), Multinational Financial Management, Wiley Student Edition,
Wiley, Eighth Edition.
3. http://www.ccilindia.com/
4. http://www.rbi.org.in/home.aspx
5. Any Financial Daily newspaper (such as, Financial Times)

Cases

1. Dozier Industries (A), Darden Business Publishing, 2005.

2. Wipro’s Billion Dollar Hedge, by Prof. Jayanth R. Varma, IIMA.

3. Country risk analysis and managing crises: Tower Associates, Thunderbird School of
Global Management, 2007.

4. Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational

Exposures, Harvard Business School, 9-205-095, 2006.

5.Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures, Harvard

Business School, 9-205-096, 2006.

6. ‘Innocents Abroad: Currencies and International Stock Returns’, Desai, Harvard Business
School, 9-204-141, 2004.

7.Globalizing the cost of capital and capital budgeting at AES, Harvard Business School, 9-
204-109, 2006.

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 Tentative Session Plan
(Subject to change by the Instructor at any time during the Term)

Date Session Topics and Sub-topics

No.
15/01/18 1 Multinational Financial Management (Chapter I )
15/01/18 2 International Flow of Funds (Chapters 2)
16/01/18 3 International Financial Markets (Ch. 3)

17/01/18 4, 5 Exchange Rate Determination (Ch. 4)

 Reserve Bank of India (2007), “Foreign Exchange

Market”, Chapter VI, Report on Currency and Finance.
(Refer ICF Handbook)
 Ashima Goyal, “Evolution of India’s Exchange Rate
Regime”, http://www.igidr.ac.in/pdf/publication/WP-
2010-024.pdf

18/01/18 6, 7 Currency Derivatives (Ch. 5)

Tulsi Lingareddy, (2009), Foreign Exchange Markets in India:

Futures V/S Forward Trading, the Clearing Corporation of India
Ltd.

19/01/18 8 Currency Parity Conditions (Chapter 7)

22/01/18 9, 10 Relationships among Inflation, Interest Rates, and Exchange Rates

(Chapter 8)

22/01/18 11 Forecasting Exchange Rates (Chapter 9)

23/01/18 12 Measuring Exposure to Exchange Rate Fluctuations (Chapter l0)

24/01/18 13, 14 Managing Transaction Exposure (Chapter 1l)
Managing Economic and Translation Exposure (Chapter 12)

25/01/18 15, 16 Exam 1

29/01/18 17 Direct Foreign Investment (Chapter l3)

29/01/18 18 Multinational Capital Budgeting (Chapter 14)

30/01/18 19 Country Risk Analysis (Chapter 16)

31/01/18 20 Long-Term Debt Financing (Chapter 18)

31/01/18 21 Short-Term Financing (Chapter 20)

1/2/2018 22, 23 Case Presentations

2/2/2018 24 Case Presentations

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