Preface

Selected Currencies and Symbols

Symbols and Acronyms



Part 1 The Global Financial Management Environment

1 Introduction to International Financial Management

1.1 The Rise of the International Company

1.2 The Internationalization of Business and Finance

1.3 International Financial Management: Theory and Practice

1.4 Outline of the Text

Appendix 1A The Origins and Consequences of International Trade



2 Exchange Rate Determination

2.1 Setting the Equilibrium Spot Exchange Rate

2.2 Expectations and the Asset Market Model of Exchange Rates

2.3 The Fundamentals of Central Bank Intervention

2.4 The Equilibrium Approach to Exchange Rates

2.5 Summary and Conclusions



3 The International Monetary System

3.1 Alternative Exchange Rate Systems

3.2 A Brief History of the International Monetary System

3.3 The European Monetary System and Monetary Union

3.4 Emerging Market Currency Crises

3.5 Summary and Conclusions



4 Currencies: Expectations, Parities and Forecasting

4.1 Arbitrage and the Law of One Price

4.2 Purchasing Power Parity

4.3 The Fisher Effect

4.4 The International Fisher Effect

4.5 Interest Rate Parity Theory

4.6 The Relationship Between the Forward Rate and the Future Spot Rate

4.7 Currency Forecasting

4.8 Summary and Conclusions



5 The International Monetary System and The Balance of Payments

5.1 Balance-of-Payments Categories

5.2 The International Flow of Goods, Services and Capital

5.3 Coping with the Current-Account Deficit

5.4 Summary and Conclusions



6 Country Risk

6.1 Measuring Political Risk

6.2 Economic and Political Factors Underlying Country Risk

6.3 Country Risk Analysis in International Lending

6.4 Summary and Conclusions



Part 2 Currency and Derivatives Markets

7 Currency Markets

7.1 Organization of the Foreign Exchange Market

7.2 The Spot Market

7.3 The Forward Market

7.4 Summary and Conclusions



8 Currency Derivatives

8.1 Futures Contracts

8.2 Currency Options

8.3 Reading Currency Futures and Options Prices

8.4 Summary and Conclusions

Appendix 8A Option Pricing Using Black-Scholes

Appendix 8B Put-Call Option Interest Rate Parity



9 Interest Rate Derivatives

9.1 Interest Rate and Currency Swaps

9.2 Interest Rate Forwards and Futures

9.3 Structured Notes

9.4 Credit Default Swaps

9.5 Summary and Conclusions



Part 3 Managing Currency Risks

10 Translation and Transaction Exposure

10.1 Alternative Measures of Foreign Exchange Exposure

10.2 Alternative Currency Translation Methods

10.3 Transaction Exposure

10.4 Designing a Hedging Strategy

10.5 Managing Translation Exposure

10.6 Managing Transaction Exposure

10.7 Summary and Conclusions

Appendix 10A Currency Translation in Practice



11 Economic Exposure

11.1 Foreign Exchange Risk and Economic Exposure

11.2 The Economic Consequences of Exchange Rate Changes

11.3 Identifying Economic Exposure

11.4 Calculating Economic Exposure

11.5 An Operational Measure of Exchange Risk

11.6 Managing Operating Exposure

11.7 Summary and Conclusions



Part 4 Financing International Operations

12 International And Domestic Capital Markets

12.1 Corporate Sources and Uses of Funds

12.2 Domestic Capital Markets as International Financial Centers

12.3 Development Banks

12.4 Project Finance

12.5 Summary and Conclusions



13 International Financial Markets

13.1 The Eurocurrency Market

13.2 Eurobonds

13.3 Note Issuance Facilities and Euronotes

13.4 Euro-Commercial Paper

13.5 The Asia currency Market

13.6 Summary and Conclusions



14 The International Cost of Capital

14.1 The Cost of Equity Capital

14.2 The Weighted Average Cost of Capital for Foreign Projects

14.3 Discount Rates for Foreign Investments

14.4 The Cost of Debt Capital

14.5 Establishing a Worldwide Capital Structure

14.6 Valuing Low-Cost Financing Opportunities

14.7 Summary and Conclusions



Part 5 International Capital Budgeting

15 International Portfolio Investment

15.1 The Risks and Benefits of International Equity Investing

15.2 International Bond Investing

15.3 Optimal International Asset Allocation

15.4 Measuring the Total Return from Foreign Portfolio Investing

15.5 Measuring Exchange Risk on Foreign Securities

15.6 Summary and Conclusions



16 Strategies For Foreign Direct Investment

16.1 Theory of the Multinational Corporation

16.2 The Strategy of Multinational Enterprise

16.3 Designing a Global Expansion Strategy

16.4 Summary and Conclusions



17 International Capital Budgeting

17.1 Basics of Capital Budgeting

17.2 Issues in Foreign Investment Analysis

17.3 Foreign Project Appraisal: The Case of International Machine Tools

17.4 Political Risk Analysis

17.5 Growth Options and Project Evaluation

17.6 Summary and Conclusions

Appendix 17A Managing Political Risk



Part 6 International Management of Working Capital

18 International Trade Management

18.1 Payment Terms in International Trade

18.2 Documents in International Trade

18.3 Financing Techniques in International Trade

18.4 Government Sources of Export Financing and Credit Insurance

18.5 Countertrade

18.6 Summary and Conclusions



19 Managing Working Capital

19.1 International Cash Management

19.2 Accounts Receivable Management

19.3 Inventory Management

19.4 Short-Term Financing

19.5 Summary and Conclusions



20 Financial Management for The Global Enterprise

20.1 The Value of the Multinational Financial System

20.2 Intercompany Fund-Flow Mechanisms: Costs and Benefits

20.3 Designing a Global Remittance Policy

20.4 Summary and Conclusions



Glossary

Index