2012/2013
KAN-AEF_AE55 International Finance
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English Title
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International Finance
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Language
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English
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Exam ECTS
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7.5
ECTS
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Type
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Mandatory
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Level
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Full Degree Master
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Duration
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One Semester
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Course period
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Autumn
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Time Table
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Please see course schedule at e-Campus
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Study board
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Study Board for MSc in Economics and Business Administration
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Course coordinator
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Christian Wagner
- Department of Finance
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Main Category of the Course
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Finance
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Economics, macro economics and managerial economics
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Last updated on 09-07-2012
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Learning objectives
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The aim of this course is to provide the student with a firm knowledge of the functioning of international financial markets. The course focuses on the theory and practice of managing various types of exposures to exchange rate risk in international markets using modern exchange rate instruments such as forwards, futures, swaps and options. The course concludes with a discussion of optimal portfolios and capital budgeting in an international context.
Upon completion of the course the student should be able to:
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Give an overview of the foreign exchange markets and the basic theories of exchange rate determination.
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Understand and price the most important exchange rate products – forwards, futures, swaps and options
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Understand how to use exchange rate instruments for arbitrage, hedging and speculation.
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Understand the behaviour of exchange rates and the international parity conditions.
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Understand and characterize the risk-return characteristics of an international portfolio.
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Identify and measure the effect of the exchange rates on the value of the firm.
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Understand the different kinds of exchange rate exposures and how to hedge them.
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Understand how investment in international projects can impact the value of the firm.
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Examination
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International Finance
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International Finance:
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Type of test
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Written Exam
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Marking scale
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7-step scale
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Second examiner
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No second examiner
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Exam period
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December/January and February
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Aids
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Closed Book
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Duration
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4 Hours
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The exam has the form of an individual 4-hour closed book exam (i.e. neither written materials nor technical aids are allowed at the exam, except from non-electronic language dictionaries and Texas Instruments TI-30X IIS (solar), Texas Instruments TI-30X IIB (battery), TI-30X IIS/IIB, TI-30XS MultiView and TI-30XB MultiView). Cf. The Regulations for written tests at CBS. The regular exam takes place in December. The make-up/ re-exam takes place in February.
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Course content
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This is a progressive course. It is suggested that students concurrently enroll in both International Finance and Capital Market Theory, as we will build on some of the concepts covered in that course.
We begin with an overview of international finance and the basic theories of exchange rate determination. The first part of the course will focus on foreign exchange markets and the various exchange rate products available for arbitrage, hedging and speculation. We will study spot and forward exchange rates for currency, then move on to currency futures, currency swaps and currency options. Having described these cornerstones of the foreign currency markets, attention is directed toward understanding the determinants of foreign exchange rates, the international parity conditions and techniques for exchange rate forecasting. We then examine the issues a firm faces when measuring and hedging exchange rate risk exposures in international markets. In the final part of the course, we study the international capital asset pricing model (ICAPM) in assessing the risk-return trade-offs of a diversified international portfolio. We conclude by putting all the pieces together and studying capital budgeting and investment analysis in an international context.
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Teaching methods
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Lectures with exercises
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Expected literature
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Preliminary literature.
Piet Sercu (2009). International Finance. Princeton University Press.
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Last updated on 09-07-2012
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