INTERNATIONAL FINANCIAL MANAGEMENT

 

(I.F.M)

 

 

Arbitrage : Arbitrage is  the act of simultaneously buying a currency in one market  and selling it in another to make a profit by taking advantage of price or exchange rate differences in the two markets. If the arbitrage operations are confined to two markets only, they will be known as “ two- Point” arbitrage. The term arbitrage refers to the purchase of a currency in that financial center where it is cheaper for immediate resale in another center where it is relatively expensive so as to make a profit out of this two- step deal.

 

 

 

Foreign Direct Investment: Foreign direct investment is investment by a transnational corporation to increase its international business. When firms become multinational, they undertake FDI. It generally involves the establishment of new production facilities in foreign countries to earn extra returns. The foreign investment decision results from a complex interaction of factors that differ in many ways from that governing the domestic investment decision. Foreign investment is generally motivated by a complex set of strategic, behavioural and economic and financial consideration. The IMF defines foreign investment as FDI when the investor holds 10% or more of the equity of an enterprise. FDI refers to investment in a foreign country where the investors retains control over the investment. Foreign direct  investment are two types. Namely foreign direct investment (FDI) and portfolio inves