Introductory description

This is an elective module available for WBS and non-WBS students.

a) To extend students’ knowledge and understanding of the theory of corporate financial management to include firms that operate in an international context.

b) To develop students’ critical reasoning skills in the context of international financial risk management.

c) To equip students with the practical skills required of financial managers in international companies.

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

History and background of the development of the international monetary system.
The market for foreign exchange.
International parity relations and forecasting exchange rates.
International money, equity and bond markets.
Currency forwards and futures markets, swap markets and options markets.
Managing economic, transaction and translation exposure.
International portfolio investment.
Foreign direct investment.
International capital budgeting.
International taxation.

Learning outcomes

By the end of the module, students should be able to:

• A systematic understanding of foreign exchange markets and how the foreign exchange risk is managed.
• Application of relevant knowledge to a range of situations in an international valuation and investment context.
• Using analytical models and/or spreadsheets to undertake analyses of the foreign exchange markets.
• Evaluating the weaknesses of standard econometric models to forecast exchange rates.

Indicative reading list

Bekaert, G. and R.J. Hodrick (BH, 2017). International Financial Management, Third Edition. Pearson Prentice Hall.
Eun, C.S and B.G. Resnick (ER, 2014), International Finance (Global Edition). McGraw-Hill.
Eun, C.S., Resnick, B.G., and S. Sabherwal (ERS, 2012). International Finance (Global Edition). McGraw-Hill.

Subject specific skills

Identification of foreign exchange risks run by international firms.
Decision to hedge foreign exchange risk and strategies to alleviate exchange-rate risk.
Computing the arbitrage opportunities in the FX market.
Stating and applying the Interest-Rate Parity and Purchasing Power Parity theorems in the context of foreign exchange.
Evaluating the information contained in the Balance of Payments (BOP).

Transferable skills

Understanding of commonly used empirical and econometrics tools in international finance; ability to analyse data.
Oral communication skills to discuss policy relevant questions in seminar discussions.