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International Financial Management

Book Description

International Financial Management blends the core concepts and theories of international finance with practical applications and examples. With its coverage of real-world data, recent developments in the world of finance, and examples of financial and economic practices and policies in the Indian as well as the global context, the book is designed to help the reader understand the implications of financial theory for decision making.

Table of Contents

  1. Cover
  2. Title Page
  3. Brief Contents
  4. Contents
  5. About the Author
  6. Dedication
  7. Foreword
  8. Preface
  9. Reviewers
  10. 1. The Foreign Exchange Market: Structure and Operations
    1. 1.1 Introduction
    2. 1.2 Money as a Medium of Exchange
    3. 1.3 The Foreign Exchange Market
    4. 1.4 Arbitrage
    5. 1.5 Nostro, Vostro, and Loro Accounts
    6. 1.6 Forward Rates and Future Spot Rates
    7. 1.7 The U.S. Dollar as a Vehicle Currency
    8. 1.8 Trends in Foreign Exchange Trading
    9. 1.9 Networks for International Transactions
    10. 1.10 The Indian Foreign Exchange Market
    11. Summary
    12. Questions and Problems
    13. Further Reading
  11. 2. The International Monetary System
    1. 2.1 Introduction
    2. 2.2 The Gold Standard
    3. 2.3 The Gold Exchange Standard
    4. 2.4 The Bretton Woods System
    5. 2.5 Post—Bretton Woods Systems
    6. 2.6 Alternative Exchange Rate Regimes
    7. 2.7 The IMF Classification of Exchange Rate Regimes
    8. 2.8 Selection and Management of Exchange Rate Regimes
    9. 2.9 Exchange Rate Policy and Monetary Policy
    10. 2.10 The Par Rate of Exchange
    11. 2.11 Emergence of the Euro
    12. 2.12 Exchange Rate of the Indian Rupee
    13. 2.13 Depreciation, Appreciation, Devaluation, and Revaluation
    14. 2.14 Convertibility of Currency
    15. 2.15 International Liquidity and International Reserves
    16. 2.16 Sterilization
    17. Summary
    18. Questions and Problems
    19. Further Reading
  12. 3. The Balance of Payments: Implications for Exchange Rates
    1. 3.1 Introduction
    2. 3.2 The Balance of Payments Manual
    3. 3.3 Functions of the BOP
    4. 3.4 Principles of BOP
    5. 3.5 BOP Accounting
    6. 3.6 National Income and International Transactions
    7. 3.7 The BOP and Exchange Rates
    8. 3.8 The BOP and Money Supply
    9. 3.9 India’s BOP
    10. Summary
    11. Questions and Problems
    12. Case Study
    13. Further Reading
  13. 4. International Parity
    1. 4.1 Introduction
    2. 4.2 Exchange Rate Determination
    3. 4.3 Factors Affecting Exchange Rates
    4. 4.4 The BOP Theory of Exchange Rates
    5. 4.5 The Purchasing Power Parity (PPP) Theory
    6. 4.6 The Real Exchange Rate
    7. 4.7 The Real Effective Exchange Rate (REER)
    8. 4.8 Interest Rates and Exchange Rates
    9. 4.9 Forward Rate Parity
    10. 4.10 The Fisher Effect
    11. 4.11 The International Fisher Relation
    12. 4.12 Interrelationship of Parity Conditions
    13. 4.13 Exchange Rate Forecasting
    14. Summary
    15. Questions and Problems
    16. Further Reading
  14. 5. Management of Foreign Exchange Exposure and Risk
    1. 5.1 Introduction
    2. 5.2 Foreign Exchange Exposure and Risk: A Comparison
    3. 5.3 Real and Nominal Exchange Rates
    4. 5.4 Types of Exposure
    5. Summary
    6. Questions and Problems
    7. Case Study
    8. Further Reading
  15. 6. Currency Forwards and Futures
    1. 6.1 Introduction
    2. 6.2 Currency Forward Contracts
    3. 6.3 Currency Futures Contracts
    4. 6.4 Traders and Trading Operations
    5. 6.5 A Glimpse of Two Major Futures Exchanges
    6. 6.6 Forwards and Futures: A Comparison
    7. 6.7 Relationship Between Spot Rates and Futures Prices
    8. 6.8 Pricing of Currency Futures
    9. 6.9 The Hedge Ratio
    10. 6.10 Cross Hedging and Delta Cross Hedging
    11. 6.11 The U.S. Dollar Index (USD×)
    12. 6.12 Interest Rates: Basic Concepts
    13. 6.13 Currency Futures in India
    14. Summary
    15. Questions and Problems
    16. Further Reading
  16. 7. Currency Options
    1. 7.1 Introduction
    2. 7.2 Forms of Options
    3. 7.3 In-the-Money, Out-of-the-Money, and At-the-Money
    4. 7.4 Disposing of Options
    5. 7.5 The Chemistry of Options
    6. 7.6 Option Value
    7. 7.7 Bounds for Option Prices
    8. 7.8 Determinants of Option Price
    9. 7.9 Trading Strategies
    10. 7.10 The Binomial Option Pricing Model
    11. 7.11 The Black-Scholes Valuation Model
    12. 7.12 Put-Call Parity
    13. 7.13 The Greeks
    14. 7.14 Forwards/Futures and Options: A Comparison
    15. 7.15 Futures Options
    16. 7.16 Currency Options Trading in India
    17. Summary
    18. Questions and Problems
    19. Case Study
    20. Further Reading
  17. 8. Financial Swaps
    1. 8.1 Introduction
    2. 8.2 Parallel Loans
    3. 8.3 Back-to-Back Loans
    4. 8.4 Types of Swaps
    5. 8.5 A Swap as a Series of Forward Contracts
    6. 8.6 Market Quotations for Swaps
    7. 8.7 Derivatives Trading in India
    8. Summary
    9. Questions and Problems
    10. Case Study
    11. Further Reading
  18. 9. Cross-border Investment Decisions
    1. 9.1 Introduction
    2. 9.2 Capital Budgeting
    3. 9.3 Approaches to Project Evaluation
    4. 9.4 Risks in Cross-border Investment Decisions
    5. 9.5 Incorporating Risk in Investment Decisions
    6. 9.6 Real Options
    7. Summary
    8. Questions and Problems
    9. Case Study
    10. Further Reading
  19. 10. Financing Decisions of MNCs
    1. 10.1 Introduction
    2. 10.2 The Cost of Capital
    3. 10.3 Capital Structure
    4. 10.4 Methods of Raising Capital
    5. Summary
    6. Questions and Problems
    7. Further Reading
  20. 11. Management of Working Capital: An International Perspective
    1. 11.1 Introduction
    2. 11.2 Cash Management
    3. 11.3 Marketable Securities
    4. 11.4 Management of Receivables
    5. 11.5 Inventory Management
    6. 11.6 Financing Current Assets
    7. Summary
    8. Questions and Problems
    9. Case Study
    10. Further Reading
  21. 12. International Trade
    1. 12.1 Introduction
    2. 12.2 Theories of International Trade
    3. 12.3 The World Trade Organization
    4. 12.4 Trends in World Trade
    5. 12.5 India’s International Trade
    6. 12.6 International Trade Finance
    7. 12.7 Documents Used in International Trade Finance
    8. 12.8 Institutional Credit
    9. 12.9 Imports into India: Guidelines for Trade Credits
    10. 12.10 Forfaiting
    11. 12.11 Countertrade
    12. 12.12 The Export-Import Bank of India
    13. 12.13 The Export Credit Guarantee Corporation
    14. Summary
    15. Questions and Problems
    16. Further Reading
  22. 13. Foreign Investments
    1. 13.1 Introduction
    2. 13.2 Foreign Direct Investment
    3. 13.3 Foreign Investments in India
    4. 13.4 Indian Depository Receipts
    5. 13.5 Foreign Investments by Indian Companies
    6. 13.6 The Bilateral Investment Promotion and Protection Agreement
    7. 13.7 Trends in FDI
    8. 13.8 Causes of Low FDI in India
    9. Summary
    10. Questions
    11. Further Reading
  23. 14. Portfolio Theory: An International Perspective
    1. 14.1 Introduction
    2. 14.2 The Markowitz Portfolio Model
    3. 14.3 The Capital Asset Pricing Model
    4. 14.4 International Portfolio Diversification
    5. Summary
    6. Questions and Problems
    7. Further Reading
  24. 15. The Indian Accounting and Taxation System
    1. 15.1 Introduction
    2. 15.2 The Accounting Standards Board
    3. 15.3 Accounting Standard 11
    4. 15.4 Global Tax Rates
    5. 15.5 The Taxation System in India
    6. 15.6 India’s Double-taxation Avoidance Agreements
    7. Summary
    8. Questions and Problems
    9. Case Study
    10. Further Reading
    11. Appendix 15.1
  25. 16. Multilateral Financial Institutions
    1. 16.1 Introduction
    2. 16.2 The International Bank for Reconstruction and Development
    3. 16.3 The International Development Association
    4. 16.4 The International Finance Corporation
    5. 16.5 The Asian Development Bank
    6. 16.6 The International Monetary Fund
    7. Summary
    8. Questions and Problems
    9. Further Reading
  26. Notes
  27. Acknowledgements
  28. Copyright