BFC 3240
INTERNATIONAL FINANCE
WEEK 1
Introduction to International Finance: The global
financial marketplace: Prospects and challenges
Learning Objectives
1. Explore the global financial marketplace—players and
playing field
2. Consider how the theory of comparative advantage
applies to multinational business
3. Examine how international financial management differs
from domestic financial management
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The global financial marketplace
• Multinational enterprises: The core unit of multinational
financial management
• Securities and institutions
• The currency market
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Multinational Enterprises (MNE)
• The core unit of multinational financial management.
– A multinational enterprise (MNE) has operating branches,
subsidiaries, or affiliates located in foreign countries.
– Why firms go global?
– What are the risks of going global?
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Export of Australian wine by destination country
As of 30 June 2022 and change vs previous financial year
Av value per
Volume
Value
litre
ML
% change
FOB $A million
% change
$A/L
% change
UK
227,448,081
-15%
$421,480,477
-10%
$1.85
5%
USA
138,840,301
10%
$436,135,418
9%
$3.14
-1%
Canada
53,442,488
4%
$174,008,440
-5%
$3.26
-9%
New Zealand
32,083,408
13%
$107,664,315
10%
$3.36
-3%
Germany
32,070,260
-11%
$46,049,923
-16%
$1.44
-5%
Denmark
20,018,606
3%
$41,533,558
15%
$2.07
11%
Japan
13,795,352
9%
$50,533,739
12%
$3.66
2%
China mainland
6,013,386
-88%
$24,578,247
-96%
$4.09
-65%
World
625,224,597
-10%
$2,082,297,614
-19%
$3.33
-10%
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Exchange rates 2022
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Players and participants of the
global financial market
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The Market for Currencies
• Most currencies are quoted against the US dollar as in
“so many units per US dollar.”
• Exhibit 1.2 provides selected currency exchange rate
quotes.
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Exhibit 1.2 Selected Global Currency
Exchange Rates for January 2, 2018 (1 of 2)
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Exhibit 1.2 Selected Global Currency
Exchange Rates for January 2, 2018 (2 of 2)
Note that a number of different currencies use the same symbol (for example both China
and Japan have traditionally used the ¥ symbol, which means “round” or “circle,” for yen
and yuan respectively. All quotes are mid-rates, and are drawn from the Financial Times.
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Does a currency trader offer you the same
price for buying and selling US dollars?
• The rates at which currency traders buy currency: bid
rate
• The rates at which currency traders sell currency: offer
rate
• The difference is bid-ask spread.
• Some currencies have higher bid-ask spread than others.
Why?
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