Summary Fundamentals of Multinational Business Finance - International Financial Management (IFI) - Exam Preparation
10 keer bekeken 0 keer verkocht
Vak
Fundamentals of International Finance (IFI)
Instelling
Hanzehogeschool Groningen (Hanze)
Boek
Fundamentals of Multinational Finance
This summary offers an in-depth explanation of the main aspects of international finance management that can be asked in examinations. Use this as your guide to prepare yourself for all the topics. Includes examples, images, and even some YouTube videos for further explanation. The topics covered a...
Fundamentals of Multinational Finance - International Financial Management (IFI) - Foreign Exchange Risk Management (Hedging Strategies)
Fundamentals of Multinational Finance - International Financial Management (IFI) - Exchange Rates (BID-ASK, FORWARD MARKET ETC)
Fundamentals of Multinational Finance - International Financial Management (IFI) - Exchange Rate Determination and Forecasting
Alles voor dit studieboek (4)
Geschreven voor
Hanzehogeschool Groningen (Hanze)
International Business and Management Studies
Fundamentals of International Finance (IFI)
Alle documenten voor dit vak (9)
Verkoper
Volgen
amy5430
Ontvangen beoordelingen
Voorbeeld van de inhoud
BASICS EXCHANGE RATES.......................................................................................................3
Globalization process → why/how do firms become multinationals?...................................... 3
Foreign exchange rate definitions............................................................................................3
Currency quotes: $/€ vs. EUR/USD.............................................................................3
Appreciation/Depreciation (floating currency).............................................................. 3
Revaluation/Devaluation (fixed currency).................................................................... 4
Bid/ask rates:........................................................................................................................... 4
Cross rates.............................................................................................................................. 5
Forward exchange rate and forward points............................................................................. 6
Exchange rate regimes: fixed vs floating:................................................................................ 6
Impossible trinity - states that country can only have 2 out of 3:............................................. 6
EXCHANGE RATE DETERMINATION & FORECASTING.......................................................... 7
International Parity conditions..................................................................................................7
Balance of payments............................................................................................................... 8
Basics of BOP..............................................................................................................8
J-curve Adjustment Path..............................................................................................9
Asset market Approach......................................................................................................... 10
FOREIGN EXCHANGE RISK MANAGEMENT.......................................................................... 11
Transaction exposure.............................................................................................................11
Receivables/payables in foreign currency (purchasing/selling)................................. 11
Funds loaned or borrowed in foreign currency.......................................................... 12
Currency Risk Management.................................................................................................. 12
1. Unhedged (uncovered risk)..........................................................................................12
2. Hedging Options.......................................................................................................... 13
1. Forward Market Hedge.......................................................................................... 13
2. Money Market Hedge (Balance Sheet Hedge)...................................................... 13
3. Option Market Hedge.............................................................................................15
Foreign currency options....................................................................................................... 16
Option Fundamentals.......................................................................................................16
Basic Types of Options:............................................................................................. 16
Key Players:...............................................................................................................16
Three Price Elements................................................................................................ 17
Premium Payment..................................................................................................... 17
Options Position Classification...................................................................................17
Intrinsic and time value.................................................................................................... 18
Comparing the costs of different hedges................................................................... 19
SPECULATIONS IN MARKETS............................................................................................ 20
INTEREST RATE & CURRENCY SWAPS................................................................................. 21
, Operating Exposure...............................................................................................................21
How to hedge?.................................................................................................................21
Common operating or financing policies:.........................................................................21
Interest rate risk..................................................................................................................... 22
How to hedge?.................................................................................................................22
Swaps.................................................................................................................................... 22
Currency swap................................................................................................................. 22
Interest swap....................................................................................................................22
INTERNATIONAL TRADE FINANCE......................................................................................... 24
Credit Risks associated with international trade.................................................................... 24
3 Key Documents to Minimize Risk....................................................................................... 24
1. Letter of credit (L/C)..................................................................................................... 24
2. Bill of lading..................................................................................................................24
3. Drafts........................................................................................................................... 25
The Bank as intermediary: The Process of minimising risk in international trade................. 25
Benefits of the System (3 – Key Documents)........................................................................ 25
The Trade Transaction Time-Line and Structure................................................................... 26
Government Programs to Help Finance Exports................................................................... 27
MULTINATIONAL CAPITAL BUDGET....................................................................................... 28
Multinational Capital Budgeting Steps................................................................................... 28
Project vs Parent viewpoint:.................................................................................................. 28
Project viewpoint..............................................................................................................28
Parent viewpoint.............................................................................................................. 28
Foreign Project Budgeting Complexities................................................................................28
Standard methods of discounted cash flow analysis............................................................. 29
Sensitivity analysis.................................................................................................................29
Project Viewpoint Measurement...................................................................................... 29
Parent Viewpoint Measurement.......................................................................................30
Real Option Analysis............................................................................................................. 30
,BASICS EXCHANGE RATES
Globalization process → why/how do firms become multinationals?
Market seekers – produce in foreign markets to satisfy demand/ export to markets other than their own
Raw material seekers – cheaper raw materials outside domestic market
Production efficiency – produce in countries where 1+ factors of production cheaper
Knowledge seekers – gain access to new technologies or managerial expertise
Political safety seekers – establish operations in countries where gov is unlikely to take over/ mess with
private business
The Globalisation Process:
Phase 1: company not yet international/global
Global Transition 1 – domestic to international trade
- begin importing materials & exporting products internationally
Challenges:
a) Financial Demands (demand of financial management above traditional)
b) Foreign exchange risks now born by firms
c) Credit Risk Management begins, potential for non-payment/non-delivery
Global Transition Phase 2: Trade to multinational Phase
● Comp. establishes foreign sales/service affiliates
● Comp. establishes manufacturing operations abroad by licensing foreign firms to
produce/service AKA CHILD LABOUR ‘N SHIT
● Firm must identify sources of competitive advantage
Foreign exchange rate definitions
Currency quotes: $/€ vs. EUR/USD
Currency Quote – the price of one currency in terms of another
, Revaluation/Devaluation (fixed currency)
– change in exchange rate determined by government/bank.
- Devaluation it weakens,
- revaluation it strengthens
Bid/ask rates:
EUR/USD 1.2500/05
- Not sure whether to use the bid or ask rate? Do whatever benefits the bank most.
Bid rate – price at which bank will buy currency
Ask rate – price at which bank will Sell currency
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
√ Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, Bancontact of creditcard voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper amy5430. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €13,49. Je zit daarna nergens aan vast.
