DFIN401 INTERNATIONAL FINANCIAL MANAGEMENT JULY AUGUST 2025

Description

SESSION	JULY-AUGUST 2025
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	4
COURSE CODE & NAME	DFIN401  INTERNATIONAL FINANCIAL MANAGEMENT

 

 

Assignment Set – 1

 

 

Q1. Explain Globalisation and write down the four phases of rapid globalisation across the world.   3+7     

Ans 1.

Globalisation

Globalisation refers to the process through which national economies, markets, cultures, and financial systems become increasingly interconnected and interdependent across international borders. It involves the free movement of goods, services, capital, technology, information, and, to a certain extent, labour among countries. In the context of international financial management, globalisation has significantly influenced trade expansion, foreign investments, multinational operations, and global capital flows. It enables firms to operate beyond

 

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Q2. Describe the components of balance of Balance of Payments.          10       

Ans 2.

Components of Balance of Payments

Current Account

The current account represents the flow of goods, services, income, and unilateral transfers between a country and the rest of the world during a given period. It is the most visible component of the Balance of Payments and reflects the trade performance and income position of an economy. Trade in goods includes exports and imports of tangible commodities such as machinery, petroleum products, agricultural goods, and manufactured items. A surplus arises when exports exceed imports, while a deficit occurs when imports are

 

 

Q3. Write Short notes on:

1. International Fisher Effect
2. Purchasing Power Parity 5+5

Ans 3.

(i). International Fisher Effect

The International Fisher Effect explains the relationship between interest rate differentials and expected changes in exchange rates between two countries. It states that the difference in nominal interest rates between two nations is equal to the expected rate of change in their currencies. According to this theory, currencies with higher nominal interest rates are expected to depreciate relative to currencies with lower interest rates.

This concept is derived from the Fisher Effect, which links nominal interest rates with

 

 

Assignment Set – 2

 

 

Q4. Define value at risk and the various determinants of foreign exchange exposure.  3+7     

Ans 4.

Value at Risk (VaR)

Value at Risk (VaR) is a quantitative risk measurement technique used to estimate the maximum possible loss that a firm, portfolio, or financial asset may suffer over a specified period at a given confidence level under normal market conditions. It provides a single numerical value that summarises market risk exposure. For example, a daily VaR of ₹5 crore at a 99 percent confidence level indicates that there is only a 1 percent probability that the firm’s loss will exceed ₹5 crore in one trading day. VaR is widely used in foreign exchange

 

 

Q5. What aggressive and defensive approaches can a firm use in hedging?       10       

Ans 5.

Aggressive and Defensive Approaches Used by Firms in Hedging

Hedging in Foreign Exchange Risk

Hedging refers to the use of financial or operational strategies to reduce or eliminate the adverse impact of exchange rate fluctuations on a firm’s cash flows, earnings, and value. Firms adopt either aggressive or defensive approaches depending on their risk appetite, financial objectives, and market expectations.

Aggressive Hedging Approach

An aggressive hedging approach involves actively managing foreign exchange exposure with

 

 

Q6. Enumerate the various types of Double Taxation Avoidance Agreements. 10

Ans 6.

Double Taxation Avoidance Agreement

A Double Taxation Avoidance Agreement is a formal treaty signed between two countries to eliminate or reduce the problem of double taxation, where the same income is taxed in both the source country and the country of residence. Such agreements provide clarity on taxing rights, ensure fairness in international taxation, and encourage cross-border trade and investment by reducing tax-related uncertainties.

Comprehensive Double Taxation Avoidance Agreement

A comprehensive DTAA is the most common and extensive form of tax treaty. It covers