International Finance

  • 16-weeks
  • 3 credits
  • Prerequisite: F303 and F305 with grades of C- or better

Covers the international dimension of both investments and corporate finance. Develops strategies for investing internationally, including hedging exchange rate risk, adjusting to client preferences and home currencies, evaluating performance, estimating a corporation’s exposure to real exchange rate risk, strategies to hedge risk or to dynamically adjust to shocks, and reasons for a corporation to hedge. Also covers international capital budgeting, multinational transfer pricing, and international cash management.

Learning Objectives:
I. Review    
   A. The Market for Foreign Exchange    
   B. International Parity Relationships
II. International Monetary System    
    A. Types of Systems    
    B. History    
    C. Current Situation
III. Balance of Payments    
     A. B of P Equation    
     B. Fixed versus Floating Exchange Rates    
     C. Relationship to GDP Accounting
IV. Institutions and Markets    
     A. International Banking    
     B. International Bond Market    
     C. International Equity Markets    
     D. Futures and Options on Foreign Exchange
V. Foreign Exchange Exposure and Management    
     A. Economic Exposure    
     B. Translation Exposure    
     C. Transaction Exposure    
     D. Good and Bad Reasons for Corporate Hedging    
     E. Currency and Interest Rate Swaps
VI. International Portfolio Diversification    
     A. Benefits    
     B. Ex Post versus Ex Ante Realization of Benefits
VII.  International Capital Budgeting    
     A. ANPV model
VIII.  Multinational Cash Management    
     A. Centralized Funds Management    
     B. Multilateral Netting    
     C. Transfer Pricing  

Typical Text:  Multinational Business Finance, Eiteman, Stonehill and Moffett                         
                    International Financial Management, Eun and Resnick                         
                    Foundations of Multinational Financial Management, Shapiro

Kelley School of Business

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