• how to evaluate projects in foreign countries
• how to manage exposure to currency risk
• how to manage exposure to country risk
• how to design international corporate structure to maximize firm value
• what challenges firms face when issuing capital abroad
• what the options and their consequences for international investment are
• how firms can finance foreign expansion

This course introduces students to the challenges and opportunities firms face in international financial markets. The course investigates how firms can manage exposure to different forms of risk resulting from international operations. First, we look into currency markets and develop tools firms can use to manage exposure to several currencies. We also look into opportunities this provides for the diversification of risk and how exposure to foreign currencies has consequences for firm strategy. Second, we investigate how firms can navigate different tax and institutional regimes to optimize capital structure and the allocation of profits to business units. Third, we look at the integration of capital markets and challenges firm face when issuing securities abroad. Finally, the course covers means of valuing and managing investments in foreign currencies. Taken together, the course is designed to prepare students to answer questions about strategic implications of internationalization using tools based on financial analysis.

Preliminary assignment: read Agmon (2006)
Class 1: Introduction to international finance and country risk
Class 2: International capital budgeting
Class 3: Case study on international capital budgeting (I)
Class 4: Case study on international capital budgeting (II)
Class 5: Case study on international capital budgeting evaluation and discussion
Class 6: International currency markets and hedging
feedback activity: In-class quiz and discussion of answers
Class 7: Taxes and capital structure in the multinational firm
Class 8: Real options, joint ventures, and international M&A
Class 9: Project finance
Class 10: Case study on international capital budgeting
Class 11: Exam preparation and Q&A
 

Mandatory readings:

Case: Globalizing the Cost of Capital and Capital Budgeting at AES (HBS case: https:/​/​hbsp.harvard.edu/​product/​204109-PDF-ENG?itemFindingMethod=Search).

Papers:
Agmon, T. (2006). Bringing financial economics into international business research: Taking advantage of a paradigm change. Journal of International Business Studies, 37(5), 575-577.

Additional relevant readings:

Chapters 17, 18, and 22 in Sercu, P. (2009). International finance: Theory into practice. Princeton University Press.

Chapters 19-25 in Buckley, A. (2012). Multinational finance. Pearson Education.

Chapters 2-6,12, 14-16 in Butler, K. C. (2016). Multinational Finance: Evaluating the Opportunities, Costs, and Risks of Multinational Operations. John Wiley & Sons.

Chapters 1, and 2 in Gatti, S. (2012). Project finance in theory and practice: designing, structuring, and financing private and public projects. Academic Press.