International Finance and Financial Derivatives

International Finance and Financial Derivatives

UNIT I

International Finance: An Overview, Importance, Nature and Scope, Recent Changes and Challenges in IFM. International flow of Funds: Balance of Payments (BoP), Fundamentals of BOP, Accounting Components of BOP, Factors Affecting International Trade Flows, Agencies that Facilitate International Flows. International

Monetary System: Evolution, Gold Standard, Bretton Woods System, the Flexible Exchange Rate Regime, the Current Exchange Rate Arrangements, the Economic and Monetary Union (EMU).

Foreign Exchange Market: Function and Structure of the Forex Markets, Major Participants, Types of Transactions and Settlements Dates, Foreign Exchange Quotations, Factors Influencing Foreign Exchange Rates.

UNIT II

Parity Conditions in International Finance and Currency Forecasting: PPP, the Fisher Effect, The International Fisher Effect, Interest Rate Parity Theory, The Relationship Between Forward and Future spot Rate.

International Sources of Finance: Long Term- International Capital Markets (ADR’s, GDR’s), Foreign Bond Market, Foreign Banks, Euro Markets, World Bank and IMF. Short Term: Banker’s Acceptance, Discounting, Factoring, Forfating, EXIM Bank of India

UNIT III

Derivatives: Meaning, Types, Importance, Principles and Regulatory Framework in India.

Forward and Futures Contracts: Meaning, Difference Between Forward and Futures Contracts, Pricing of Futures Contracts, Determinants of Value of Futures Contracts, Mark-to-Market, Payoffs of Futures Contracts. Speculation, Hedging and Arbitrage by Using Futures Contracts.

Options Contracts: Meaning, Type, Importance, Black-Scholes Model for Pricing Options Contracts, Factors Determining Option Prices, Payoffs of Call Option and Put Option Contracts, Put-Call Parity. Option Trading Strategies: Covered Call Writing, Protective Puts, Straddles, Strangles, Strips, Straps, Spreads Including Butterfly Spreads, Calendar Spreads etc.

UNIT IV

Swaps and Swaptions: Meaning, Types, Importance and Pricing of Swaps and Swaptions. Factors Determining Price of Swaps and Swaptions.

Credit Derivatives: Meaning, Importance, Pricing Models and Strategies to Hedge by Using Credit Derivatives.

Foreign Exchange Risk Management: Measuring and Managing Transaction Exposure, Measuring and Managing Economic Exposure, and Measuring and Managing Translation Exposure, Country Risk Analysis, Foreign Exchange and Derivative Markets: Currency Futures and Option Markets, Swap and Interest Rate Derivatives.