International Finance (MIM)

Latest update: February 17, 2020.

Office: D521 (Building 2)

Office hours: by appointment

Course Description

The objective of this course is to introduce basic concepts in international finance and to acquire knowledge about the international financial system. By the end of the course, students must understand the functioning of international financial markets, gain knowledge regarding the key international financial institutions, and be able to discuss issues of international financial management. The covered topics include:

• globalisation and multinational companies;
• the international financial system;
• the functioning of the foreign exchange market;
• foreign exchange derivatives;
• hedging against foreign exchange risk.

The course requires only little preliminary knowledge from the students, such as basic macroeconomics and financial calculations.

The course description is also available in a pdf file.

Assessment

At the end of the course there will be a final exam which accounts for 100% of the final grade. To pass the course, the overall grade must be at least 9.5 (on a scale of 0 to 20).

An example of possible questions is available here: pdf.

Syllabus

1. Globalisation and Multinational Companies (slides)
   1. Multinational Corporations
   2. Consequences of Globalisation and Implication for Businesses
   3. The Theory of Comparative Advantage
2. The International Financial System (slides)
   1. An Historical Overview
   2. Fixed Versus Flexible Exchange Rates
   3. The Euro
3. The Balance of Payments (slides)
   1. Typical Balance of Payments Transactions
   2. The Accounts of the Balance of Payments
   3. Interaction with Macroeconomic Variables
4. The Foreign Exchange Rate Market (slides)
   1. Functions of the Foreign Exchange Market
   2. Market Participants
   3. Foreign Exchange Rates and Quotations
5. International Parity Conditions (slides)
   1. Prices and Exchange Rates
   2. Prices, Interest Rates, and Exchange Rates in Equilibrium
6. Foreign Currency Derivatives and Swaps (slides)
   1. Futures
   2. Options
   3. Interest Rate Derivatives

Textbooks

The main textbook for the course is

• Eiteman, Stonehill and Moffett, Multinational Business Finance, 13th edition (2013), Pearson.

Another good textbook in this area is

• Shapiro, A. C, Multinational Financial Management, 10th edition (2013), John Wiley & Sons, Inc.