Faculty will need to refer extensively to the reading material provided for this learning
unit
Visual aid 50 – Exchange rate theories
Exchange rate theories
- Factors affecting exchange rate
- PPP theory, fluctuations in exchange rate: ER index
- IRP: relation between nominal interest rate, rates of inflation, and future spot ER
- Link between BoP and ER
- Forecasting ER in short, medium and long term
Faculty will need to refer extensively to the reading material provided for this learning
unit
Visual aid 51 – Risks in international operations
Risks in international operations
- Risks as an inherent factor in the businesses of MNCs
- Transaction exposure: consolidation exposure; economic exposure
- Hedging; choice of currency of invoicing, leads and lags, indexation clauses in
contracts; netting - Covering risk in the forward market
- Advances in foreign currency
- Covering in financial futures market
- Covering in the options market
- Covering in the currency swaps
- Interest rate risk; its measurement, futures, protection, options market, OTC
- Political risk and its evaluation.
Faculty will need to refer extensively to the reading material provided for this learning
unit