21 - 07589 Cat1 IF

Ong’udi Amos
21/07589
Cat 1
a) With aid of suitable examples elucidate the Value you have derived from the study of
International finance which is one of the units you are taking this semester
Understanding Eco Political Landscape
International finance looks at the Eco political landscape within an economy.As a student making sense
out of the concept is in order for me to be in a position to make out the dynamics of global markets.
Political stability contributes to determining a country's significant fact in its economic advance. Children
living and born in a politically stable environment tend to have policies apply in the countries that relate
well in terms of supporting a politically notable less fluctuation and also hold a predictable way in which
business is done. This holds positive and gradual business climates, thus increasingly enabling foreign
investors and companies to engage economically through cooperation towards the host nation's
development.
For instance, a country that has a stable political climate may attract more foreign direct investment (FDI)
because of the reduced perceived risks. On the other hand, the country's political instability may bring
about high risks and therefore prevent decisions of investment from being taken. Analyzing from the
above, I can understand potential risks and opportunities in terms of investing in different countries with
respect to the eco-political environment and as such make well-informed decisions in the global business
environment.
Investment in Foreign Markets
International Finance explores investments in foreign markets, why, how and when these equities i.e.
shares and stocks investments are done, and how it goes on to do so through direct foreign investment. As
a student, understanding of this aspect enlightens me on the schemes behind the multinational of
businesses and investment firms.
They scrutinize into such conditions before making any investment in the foreign markets. If any such
analysis shows the existence of instability in the economy of the country, then it is not the time when one
can make any investment, or in case there are some policy changes that may happen in the near future and
may easily destabilize the former economic system. Such information reduces risks related to foreign
marketing investment and helps them in selectiveness.
From studying the issue of international finance, I can gauge some of the factors that epitomize an
investment decision, for instance, exchange rates, regulatory settings, and already existing market trends.
From that understanding, it will help make informed decisions of investment while evaluating possible
risks with the rewards that come with investing in foreign markets.
Understanding of Global Economic Condition
Studying International Finance will put me across tens and even hundreds of economies across the world
and their respective conditions.Knowledge in International Finance will equip me with the same to
provide analyses and evaluations of the economic conditions of different countries and present pertinent
views about the dynamism of the respective economy. Learning International Finance will provide
knowledge, perspective, and ability to make good decisions in managing global business environments.
For example, when businesses know the economic conditions of the countries it operates in, it helps them
to plan their international operations strategically while at the same time taking into consideration the
exchange rates, inflation rates, and political stability. Similarly, assessing the economic conditions
surrounding new barriers will certainly ensure business identifies potential risks and opportunities for
good decision making and hence sustainable growth.
Inflation Rates
One of the principles within International Finance is Inflation rate and how it commands the global
economy. Through the inflation rates analysis, I am able to determine the potential of some economies
considering their inflation rates. For instance, super high levels of inflation may indicate that the country
is most probably going to lose its purchasing power of the currency, thus lowering the price of the exports
to the consumers in the other countries. On the other hand, the low levels of inflation may indicate the
country has a stable economy that attracts it to cover the imports. This way, the firms will be in a position
to schedule their imports and exports depending on the levels of inflation to benefit from the overall
economic status.
b) Suggest any three steps / policy measures which governments of most developing countries
can put in place to enhance growth of derivatives markets
1. Regulatory Framework Enhancement

Development of sound and comprehensive regulatory frameworks, which derive the needs of derivatives
markets in developing the regulation and enforcement, which has to be easy to comprehend and uniform
in its application in the processes of trade, clearing, and settlement of transactions. There are also
guidelines and standards of best practice for the risk management, transparency, and integrity of markets
that make investors and other market players develop confidence. In this connection, international best
practices on both regulation and enforcement will help guide such best practices and ensure conformity.
2. Infrastructure Investment
Other than this, efficiency and reliability will also be achieved through investment in contemporary
infrastructure that otherwise includes trading platforms, clearhouses, and settlement systems. The
infrastructure in modern terms should be scalable and flexible enough to even cope with future growth
and technological progress. This is also equally necessary on this count to ensure low barriers to access to
market infrastructure where a diverse set of participants that includes retailers, SMEs, and institutional
investors are able to partake in the market if a large base of participants and associated liquidity effects is
to be achieved.
3. Education and Awareness Campaigns

Derivative instruments help individuals from every other sector to take up different financial roles and
should be promoted among many target group varieties. Awareness materials, education programs, and
knowledge-based products targeted can be made for a variety of target groups in the use of derivative
instruments in their development. Collaboration in encouraging the development of education programs
and information sheets will inform many in the industry, and in turn, the sustenance and growth of the
derivatives market. Raising awareness through the education programs which have developed ethical
behavior and given balance in the market among the investors or participants.
C) Required; Assuming that the importer’s objective is to maximize the sterling value of ksh
receivables, which of the hedging instruments would you recommend. Verify your answer by
estimating the sterling cost for each type of hedge. Compare the cost of hedging with non-hedging

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Ong’udi Amos

Understanding Eco Political Landscape

Investment in Foreign Markets

Understanding of Global Economic Condition

1. Regulatory Framework Enhancement

3. Education and Awareness Campaigns

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