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AC.F305 : International Financial Management

Year:11/12
Department:Accounting and Finance
Level:Part II (final year)
Learning Hours:150
Credit Points:15
Weight:0.5
Course Convenor:Dr C Stadler
Status:Live

Syllabus Rules

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The following modules may not be taken:

Assessment Rules

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  • 75% Exam
  • 25% Coursework
  • 0% No formal assessment, Optional

CMod description

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This course examines the international monetary system and financial markets particularly for derivative securities. Having provided a conceptual and institutional basis, the course then addresses issues concerning the financial management of international portfolios and multinational enterprises.

Curriculum Design: Outline Syllabus

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The main course textbook is:

Sercu, Piet, 2009, International Finance: Theory into Practice, 1st edition, Princeton University Press, Cambridge, NJ, ISBN-10: 069113667X, ISBN-13: 978-0691136677.

 

Week 1: International Finance: Institutional Background

(Money; Balance of Payments; Exchange Rate Regimes)

Required reading: Chapter 2

 

Week 2: Spot Markets for Foreign Currency

(Exchange Rates; Markets for FX; the Law of One Price; Purchasing Power Parity)

Required reading: Chapter 3

 

Week 3: Understanding Forward Exchange Rates for Currency

(Forward Contracts; Relation between FX and Money Markets; Covered Interest Parity; Market Value of an Outstanding Forward Contract)

Required reading: Chapter 4

 

Week 4: Using Forward Contracts for International Financial Management

(Forwards in Real-World Markets; Using Forwards to Hedge, Speculate and to Minimize the Impact of Market Imperfections)

Required reading: Chapter 5

 

Week 5: The Markets for Currency Futures and Swaps

(From Forwards to Futures; Hedging with Futures; Swap Contracts)

Required reading: Chapters 6 & 7

 

Week 6: Currency Options

(Basics; Jargon and Institutional Features; Arbitrage Relations; Hedging)

Required reading: Chapter 8

 

Week 7: Rationales for Corporate Hedging and Measuring Exposure

(Relevance of Hedging; Risk & Exposure; Hedging Contractual, Operating and Accounting Exposures)

Required reading: Chapters 12 & 13

 

Week 8: Cost of International Capital ? the International CAPM

(International Capital Budgeting; Single-country CAPM; InCAPM)

Required reading: Chapter 19

 

Week 9: International Capital Budgeting

(Domestic Capital Budgeting; ANPV & WACC; International Capital Budgeting)

Required reading: Chapter 21

 

Week 10: Student Presentations, Course Summary & Unfinished Business

Required reading: none

Educational Aims: Subject Specific: Knowledge, Understanding and Skills

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- To describe the structure of the international monetary system, to evaluate its development and to highlight its political dimension.
- To analyse the relationships between interest rates, inflation rates and exchange rates.
- To explain the main determinants of exchange rate movements and their interaction.
- To deepen the understanding of derivatives valuation by applying basic concepts to foreign exchange futures, options and other related instruments.
- To explain the use of foreign exchange derivatives in the context of corporation risk management against the background of (possibly) conflicting risk management objectives.
- To provide guidelines for corporate financial decision making in an international context.

Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

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By the end of the course, students should
  1. be able to give reasoned analyses of developments in international financial markets,
  2. be familiar with the valuation of foreign exchange futures, options and other related instruments,
  3. understand the conflicting objectives in corporate risk management and their implications,
  4. be familiar with the fundamentals of financing and investing in international financial markets.
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