To become prosperous, the trade between two or more countries is necessary.

These
trades arise many issues such as exchange rate risk, forward rate, spot rate and so on.
Understanding such risk is not possible without international finance. International Finance is
broad context that deals the monetary interactions between two or more countries. It also gives
an idea of foreign direct investment and currency exchange rates. Such ideas help in managing
multinational corporations. For examples, the firms exposure to the exchange rate risk is based
on the co-movements of the stock prices and exchanges rates. Some research search out that the
firms with greater dependency on sales in foreign markets have greater foreign exchange
exposure (Ito, Koibuchi, Sato, &Shimizu, 2016).

Due to foreign sales, firms have use hedge

tools to minimizes its risk and add value to the firms. This risk may be demand uncertainty,
uncertainty in foreign exchange rates and uncertainty in prices of raw materials, labor, energy
and finished products. Some writers have suggested to focus on products with constant demands
and few variants, or focusing on secure markets to manage uncertainty in demand volume and
demand mix (Bandaly, Shanker, Kahyaoglu, & Satir, 2013). Due to this, the firms can
concentrate on a limited task for target customers and reduce operating costs and overheads then
conventional plant.
Likewise, we study about call options. Call options is just a contract in which the holders
has right to buy a stated number of units of the underlying asset at a predetermined prices (strike
prices) from the counterparty (writer of the options). The European-style options exercise
options is certainly different from American style options. European-style exercised contract at
given expiry moment time for example, Wednesday between 15:50 and 16:00 but American style
options exercised at any time until the expiry moments. Based on the underlying asset of the
option agreement, a call can be an option on a stock, a stock market index, a currency, a

commodity, a bond, or an interest rate, or even a futures contract or a swap. But, in put options,
the purchaser of this right to sell expects the prices of the stock or commodity to decrease and he
deliver the sock or commodity at a profit. In case, the prices goes up, the seller of the options
need not exercised it and sell options in market for more benefit (Yunita, 2014).
Therefore, international finances is interesting subjects that teaches us how we can gain
benefits and minimizes unwanted loss in domestic and international markets.

References
Ito, T., Koibuchi, S., Sato, K., & Shimizu, J. (2016). Exchange rate exposure and risk
management: The case of japanese exporting firms. Journal of the Japanese and
International Economies, 41, 17-29.
Bandaly, D., Shanker, L., Kahyaoglu, Y., & Satir, A. (2013). Supply chain risk management - II:
A review of operational, financial and integrated approaches. Risk Management, 15(1), 131. doi:http://dx.doi.org.ezp-02.lirn.net/10.1057/rm.2012.8
Yunita, I. (2014). SENSITIVITY ANALYSIS OF "BLACK-SCHOLES" OPTION INDEX IN
INDONESIA. International Journal of Organizational Innovation (Online), 7(1), 137148. Retrieved from http://search.proquest.com.ezp-02.lirn.net/docview/1544215784?
accountid=158986

Dipankar,
Nice post. I agree with your views that NPV methods include time value of money and
gives better decision for few projects. For examples, we accept project if it has positive NPV
and reject it if NPV is negative. However, NPV is accepting in all decision doesnot work well

because it has also some limitations. It doesnot provide information about the economic
attractiveness of capital outlays. For examples, the size of the NPV is affected by the size of the
investment. Besides this, the NPV is formed on based of the assumption. Therefore, the
company require to make assumptions that relate to both the dollar amount and timing of future
cash flows associated with the project. Also, the company assume interest rate to calculate NPV
which is not more relaiable (Sercu, 2009). To make better decision, the firms use IRR with NPV
that calculate discounted rate of return and minimizes error that occurs in NPV.
References
Nbrdi, A., & Szllsi, L. (2007). Key aspects of investment analysis. APSTRACT: Applied
Studies in Agribusiness and Commerce, 1(1).
Sercu, P. (2009). International Finance: Theory into Practice. New Jersey: Princeton University
Press.