International Finance and Financial Derivatives
Subject Overview
The fifth Finance group elective, covering the international monetary system and forex markets, parity conditions and international sources of finance, derivatives (forwards, futures, options) and their pricing, and swaps, credit derivatives and foreign exchange risk management. A 4-credit elective theory paper.
Unit-wise Syllabus
4 units — click WhatsApp below to get the full notes for each
Unit 1: International finance and forex markets
Overview and scope of IFM, balance of payments fundamentals, factors affecting international trade flows, evolution of the international monetary system (Gold Standard, Bretton Woods), forex market function/structure/participants, exchange rate quotations
Unit 2: Parity conditions and financing
Purchasing Power Parity, Fisher effect, International Fisher Effect, Interest Rate Parity, forward-spot rate relationship, international capital markets (ADRs, GDRs), foreign bond markets, short-term financing (banker's acceptance, factoring, forfaiting)
Unit 3: Derivatives
Meaning, types, importance and regulatory framework of derivatives in India, forward vs futures contracts, pricing and mark-to-market, speculation/hedging/arbitrage, option contracts, Black-Scholes model, put-call parity, option trading strategies
Unit 4: Swaps and risk management
Swaps and swaptions meaning, types and pricing, credit derivatives and hedging strategies, measuring and managing transaction/economic/translation exposure, country risk analysis, currency futures and interest rate derivatives