INTERNATIONAL FINANCE
Lecturer: Vu Thuy Mai Uyen
Email:
[email protected]Office: O2.305
Office hours: Wednesday 9AM – 11 AM for Monday class and Wednesday 1PM – 3PM
for Tuesday class, by appointment
Teaching times and locations:
Lecture: Monday afternoon (1:00PM – 3:30 PM) – Tuesday Morning (8:00AM –
10:30AM)
Venue: A2.412 (Mon) – L.103 (Tue)
Teaching assistant: TBA
1. Course Description and Purpose: Following the beginning finance course, this
course is designed to explore the principles of financial management from an
international perspective. The concept of exchange rate exposure and how to
manage foreign exchange risk are to be discussed. Emphasis is placed on
corporate finance for international firms.
2. Course Learning Objectives:
This course is designed to provide a broad
introduction to the operations of international financial markets and instruments.
One of the goals of this course is to help students develop an understanding of the
workings of international financial markets, the risks of doing business in the
international arena, and most importantly, the management of exchange risk
exposure. Some of the topics covered are foreign exchange markets, foreign
exchange risk, management of exchange risk, international money and capital
markets, and capital budgeting for multinational firms (MNCs).
3. Course Learning Outcomes:
After taking the course, the student should be able to:
Understand why international finance is different from purely domestic finance.
Understand the function and structure of the foreign exchange market.
Understand the concept of arbitrage and how arbitrage works in the foreign
exchange market.
Understand the concept of exchange rate exposure.
Understand how to manage foreign exchange rate risks using balance sheet and
derivatives hedges.
Understand the risk exposure of multinational corporations when they make
investments in
foreign markets
Understand how multinational corporations make investments in overseas.
Understand how MNCs finance their projects.
4. Teaching Strategies
The learning system in this course consists of lectures and scheduled quizzes. Lectures
elaborate the appropriate theoretical content in the textbook and readings. Classes provide
a more detailed and refined analysis of both concepts and applied materials. Classes are
strongly oriented towards interactive discussion of the text and cases. In order to gain the
most from the lectures and class activities, the assigned text/reading should be read
before the lecture to participate in the discussions.
5. STUDENT RESPONSIBILITIES AND CONDUCT
5.1 Workload
It is expected that the students will spend at least six hours per week studying this course.
This time should be made up of reading, researching, working on exercises and problems,
and attending classes. In periods where they need to complete assignments or prepare for
examinations, the workload may be greater.
Over-commitment has been a cause of failure for many students. They should take the
required workload into account when planning how to balance study with part-time jobs
and other activities.
5.2 Attendance
Regular and punctual attendance at lectures and seminars is expected in this course.
University regulations indicate that if students attend less than eighty per cent of
scheduled classes they may be refused from final assessment. Exemptions may only be
made on medical grounds.
5.3 General Conduct and Behaviour
The students are expected to conduct themselves with consideration and respect for the
needs of the fellow students and teaching staff. Conduct which unduly disrupts or
interferes with a class, such as ringing or talking on mobile phones, is not acceptable and
students will be asked to leave the class. More information on student conduct is
available at the university webpage.
5.4 Keeping informed
The students should take note of all announcements made in lectures or on the course’s
Blackboard. From time to time, the university will send important announcements to their
university e-mail addresses without providing a paper copy. The students will be deemed
to have received this information.
6. LEARNING ASSESSMENT
6.1 Formal Requirements
In order to pass this course, the students must:
achieve a composite mark of at least 50; and
make a satisfactory attempt at all assessment tasks (see below).
6.2 Assessment Details
Mid-Term Exam 30%
Quizzes and Group project 30%
Final Exam 40%
Total 100%
6.3 Project Report (Written Assignment)
Students will form groups of 5 and will choose a topic from the list provided below. The
research project is a written research paper.
The paper should be about 15 pages long, double spaced, font 12, Times News Roman.
The criteria for grading the paper are the following:
1. The amount of relevant information. Use about 10-15 sources which may include
books, articles, information from Internet cites, etc.
2. Is the paper structured well? Do the parts follow logically? Are the arguments
sufficiently strong and persuasive?
No. Topics
1 International Financial Institutions – Discuss the roles of the major international organizations
involved in the global economy and the global financial markets: the IMF, the World Bank, the
Bank for International Settlements; the WTO and others. What are their main functions? In what
ways are they similar or different? Why have many of them received criticism in recent years?
2 Financial crises in South-East Asia - In 1997-98, South Korea, Thailand, Indonesia, and several
other countries in that region experienced a sharp devaluation of their currencies and severe
recessions. What went wrong? What are the competing explanations for the crises? How were the
crises managed? What was the role of the IMF? Have these economies recovered?
3 The crisis in Russia in 1998– Russia experienced a severe economic and financial crisis in 1998.
Describe what happened. What were the origins of the crisis? Was the crisis linked to the process
of economic transformation of the Russian economy and political systems? What was the effect of
the crisis in Russia on the international financial markets?
4 International Investments – Globalization has been characterized by a massive increase in cross
border investments. What types of investments are moving cross borders? From where to where?
What are the dynamics over time? Are these levels of international investment unprecedented in a
historical context? What factors motivate international investment? What are the positive and
negative effects of international investments for the recipient countries?
5 Hedge funds and private equity funds – What do we mean by the two types of funds? What do
they do? When did they become prominent players in the financial markets? What were some of
the most serious crises associated with their operation (e.g. Long-Term Capital Management)?
6 European Monetary Union – In 2001 several countries in Europe abandoned their currencies and
adopted a common currency called the euro. What is the history of this institution? What is the
institutional structure of the EMU? What is the effect on the member countries? Are there any
positive or negative consequences for the U.S.? What are the prospects for new members of the
EMU?
7. ACADEMIC HONESTY AND PLAGIARISM
Plagiarism is the presentation of the thoughts or work of another as one’s own (definition
proposed by the University of Newcastle). Students are also reminded that careful time
management is an important part of study and one of the identified causes of plagiarism
is poor time management. Students should allow sufficient time for research, drafting,
and the proper referencing of sources in preparing all assessment items. The university
regards plagiarism as a form of academic misconduct, and has very strict rules regarding
plagiarism.1
1
This is adapted with kind permission from the University of New South Wales.
Textbook: Multinational Business Finance, David K. Eiteman, Arthur I. Stonehill, Michael H.
Moffett, 12th ed.
Course Outline and Reading Assignments
Week Chapter Number
Introduction
1
Chapter 1: Globalization and the Multinational Enterprise (MNE)
Chapter 3: The International Monetary System (only cover current exchange rate
2 arrangement and fixed vs. flexible exchange rate system)
Chapter 4: International Business Transactions: The Balance of Payments
3 Chapter 6: The Foreign Exchange Market
4 Chapter 7: International Parity Conditions
Chapter 7: International Parity Conditions
5
Quiz 1: Chapter 3, 4, 6 and 7
Chapter 8: Foreign Currency Derivatives
6
Chapter 9: Interest Rate and Currency Swaps
7 CH 10: Transaction and translation Exposure
CH 10: Transaction and translation Exposure
8
Quiz 2: Chapter 8, 9 and 10
9 Mid-term exam
10 Chapter 12: Operating Exposure
11 Chapter 14: Global Cost and Availability of Capital
12 Chapter 15: Sourcing Equity Globally
13 Chapter 16: Sourcing Debt Globally
Chapter 17: International Portfolio Theory and Diversification
14
Quiz 3: Chapter 12, 14, 15 and 16
Revision
15
*Group project due
