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2023/2024  KAN-CAEFO1078U  International Finance

English Title
International Finance

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Start time of the course Spring
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for cand.merc. and GMA (CM)
Course coordinator
  • Mauricio Prado - Department of Economics (ECON)
Main academic disciplines
  • Finance
  • Economics
Teaching methods
  • Face-to-face teaching
Last updated on 30-11-2023

Relevant links

Learning objectives
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:
  • Give an overview of the foreign exchange markets and the basic theories of exchange rate determination.
  • Explain and price the most important exchange rate products – forwards, futures, swaps and options.
  • Explain how to use exchange rate instruments for arbitrage, hedging and speculation.
  • Discuss the behaviour of exchange rates and the international parity conditions.
  • Discuss and characterize the risk-return characteristics of an international portfolio.
  • Identify and measure the effect of the exchange rates on the value of the firm
  • Identify and discuss the different kinds of exchange rate exposures and how to hedge them.
  • Discuss and characterize how investment in international projects can impact the value of the firm.
International Finance:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Summer
Aids Limited aids, see the list below:
The student is allowed to bring
  • An approved calculator. Only the models HP10bll+ or Texas BA ll Plus are allowed (both models are non-programmable, financial calculators).
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
Make-up exam/re-exam
Same examination form as the ordinary exam
The number of registered candidates for the make-up examination/re-take examination may warrant that it most appropriately be held as an oral examination. The programme office will inform the students if the make-up examination/re-take examination instead is held as an oral examination including a second examiner or external examiner.
Course content, structure and pedagogical approach

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.

Description of the teaching methods
Lectures with exercises.
Feedback during the teaching period
The teacher provides solutions to exercises and previous exam questions allowing the students to check their abilities to solve relevant problems.
Student workload
Lecture + Exercises 47 hours
Exam 6 hours
Preparation 153 hours
Expected literature

Preliminary literature.
Piet Sercu (2009). International Finance. Princeton University Press.

Last updated on 30-11-2023