DIBM305 INTERNATIONAL FINANCIAL MANAGEMENT

Description

MASTER OF BUSINESS ADMINISTRATION (MBA)

SEMESTER III 

SESSION: JAN-FEB 2026

COURSE CODE & NAME: DIBM305 INTERNATIONAL FINANCIAL MANAGEMENT

 

 

 

Assignment Set – 1

 

 

Ans 1.

Definition of Balance of Payments

The Balance of Payments (BoP) is an systematically recorded statistic of all transactions in the economy between citizens of a particular country and the rest of world over a specific period, typically one year. It reflects a country’s situation in relation to other countries and is maintained with the help of Reserve Bank of India in the situation of India as per the policies that are set by the International Monetary Fund. Every transaction in the BoP is recorded with double entry bookkeeping, meaning each entry is

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Q.2. Explain various derivative instruments traded in the Foreign Exchange market.

Ans 2.

Role of Derivatives in Foreign Exchange Markets

The foreign exchange market is the largest market for financial services in the world, facilitating the exchange of currencies to facilitate global trade, investment as well as speculation. Derivative instruments on the foreign exchange market are financial contracts whose value is derived from the exchange rates of the underlying currency pairs. These instruments are widely employed by banks, companies, hedge funds, and investors to control risk of currency and speculate on rates, and to arbitrage the price difference between markets. The principal derivative instruments that are

 

Q.3. Write short notes on: (a) Interest Rate Parity (b) Forward-to-Forward Contracts.

(a) Interest Rate Parity

IRP or Interest Rate Parity (IRP) is a key theorem in international finance which determines the relationship between interest rates within two countries and the forward and spot exchange rates between their currencies. It states that the difference in nominal interest rates among two nations should be offset by the change in exchange rates between their currencies over the period of time. IRP exists in two forms. Covered Interest rate Parity says that when the investors cover their currency exposure by using forward contracts, the investment return should be similar across all nations after adjusting for the cost of hedging. If this is not the case, it opens up an arbitrage risk which can be profitably exploited by market participants, restoring equilibrium. Uncovered Interest

 

Assignment Set – 2

 

 

Q.4. Define cross-border acquisition and discuss its effects.

Ans 4.

Cross-Border Acquisition

A cross-border acquisition is a corporate transaction in which a company based in one country acquires the majority stake in an organization located in different country. It is among the principal methods of direct foreign investment, through the expansion of multinational corporations’

 

 

Q.5. Describe Foreign Exchange Exposure and highlight various techniques of managing those exposures.

Ans 5.

Foreign Exchange Exposure

Foreign exchange exposure refers to the potential risk a business confronts due to fluctuations in the exchange rate that may negatively influence its financial performance, cash flows or the valuation of its assets and obligations. Every business that operates internationally, regardless of whether they are importing as well as exporting or acquiring foreign currency, or operating out of the country operations, is subject to the risk of foreign exchange. Effectively managing this risk is an

 

Q.6. “Factoring is an efficient financing technique.” Comment.

Ans 6.

Concept of Factoring

Factoring is a type of financial agreement in which a business sells its trade receivables, meaning it’s invoices or book loans payable by the customers to a special bank, referred to as the factor for a discounted price. The factor immediately advances large portions of value of the invoice, usually between a range of seventy to ninety percent, to the seller and assumes responsibility for