International Finance NMIMS Assignment Dec 2019

International Finance

1. You work in an investment bank IBANK. You will be meeting the CEO of GlobeTech next week, who wants to understand how different international financial markets operate, as they might look to raise short-term loans or debt or equity in the future. You know the CEO has very little knowledge about this, so you have to explain to him starting with the basics. As you don&rsquot want to confuse him with many options, you decide to write in simple words the nature and purpose of four out of the five types of International Financial Markets. Limit the description to maximum one page per market type. These should be generic write-ups, nothing specific to GlobeTech.

2. One day before the meeting, the CEO of GlobeTech calls up and says now he is interested to read a write-up about Foreign Exchange Risk, as GlobeTech deals with Foreign Exchange and he should be knowing about the different type of risks. You have little time to prepare for this, so you decide to write on only three out of the five risk categories, from a general perspective, that you have learnt in the International Finance course at NGASCE. After that, to keep the client happy, you decide to do something extra. GlobeTech has to have some hedging strategies to manage its Foreign Exchange risks. So you also write from a general perspective about three corporate hedging strategies. These should be generic write-ups, nothing specific to GlobeTech.

3. A US company has exported goods worth Eur 100 million, receivable after 3 months, to a Germany based company. The forward rates are expressed as:

EUR-USD Spot 1.0973 &ndash 1.0974

Three months Forward 75.5 &ndash 76.0

• Is the EUR quoting at discount or premium to the USD What is the forward rate applicable at which the US company will enter into a forward contract
• Suppose USD is depreciating. Should the US exporter go for hedging the risk If he hedges the risk with a forward contract and the actual spot rate after 3 months turns out to be the same as the currency spot rate, what is his notional profit/ loss.