working of financial system

May 28th, 2015
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Dimensions of international finance Which make international finance different from domestic finance. • Foreign exchange and political risk o Foreign exchange risk  Foreign exchange rate is not fixed  Volatility on foreign exchange affect international financial management  It also affects on export and import management. o Political risk  It ranges from change in unexpected tax rule to outright expropriation of assets held my foreigner.

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Unit 1Dimensions of international financeWhich make international finance different from domestic finance.Foreign exchange and political riskForeign exchange riskForeign exchange rate is not fixedVolatility on foreign exchange affect international financial managementIt also affects on export and import management. Political riskIt ranges from change in unexpected tax rule to outright expropriation of assets held my foreigner.Market imperfection Perfect market is characterized byPerfect mobility of resources Perfect information with zero costNo transportation costIn the real world we foundLegal restrictionDiscriminatory taxationTransportation costCost of informationMarket imperfection represented various impediments preventing markets from functioning perfectly, play an important role in motivating Multinational Companies to locate production overseas. Expanded opportunity setDue to globalization firms venture into global market, they can benefit from expanded opportunity set Integration of global resourcesCan locate production plant anywhere of the worldRise funds from any capital marketHire employees from cheaper marketAdvantage of economic scaleGo

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