• Combine and apply insights from the syllabus to solve financial problems and take financial decisions
• Demonstrate ability to reflect upon financial challenges
• Apply financial techniques to quantify the impact of strategic decisions
• Explain the assumptions needed when applying a certain theory / method / model
• Independently combine and logically structure the finance vocabulary / theories / methods / models/ regulatory/institutional/practical knowledge, and empirical evidence when discussing challenges in finance
• Demonstrate ability to reflect upon challenges with multiple suggested solutions where only some are relevant

Exchange rates touch almost every firm. Even a purely domestic business can feel the pressure when a foreign competitor benefits from a weaker currency, or when commodity prices priced in dollars shift. For firms that buy, sell, borrow, or invest across borders, the exposure is direct and immediate: movements in exchange rates can reshape revenues, costs, and profits in ways that have nothing to do with the underlying business. This course is about understanding that problem — where it comes from, how large it can be, and what managers can do about it.

During the course, students will develop a working knowledge of how foreign exchange markets operate, what drives exchange rate movements, and how those movements feed through to the balance of payments. They will learn to price and use the key instruments available to internationally active firms — forward contracts, interest rate parity conditions, and FX options — and to understand the distinction between nominal and real exchange rates and what purchasing power parity can and cannot tell us about long-run rate behaviour. The course also covers international bond markets, examining how firms raise debt across borders, how currency denomination affects the cost of capital, and what additional risks and opportunities international bond issuance introduces.

The course concludes by bringing these tools to bear on the central practical question: given that currency risk is real, how should a firm decide whether it is exposed and what is worth hedging? Students will work through methods for measuring actual economic exposure — not just accounting entries — and compare hedging strategies ranging from financial derivatives to operational responses such as natural hedging and currency matching. The aim is not to train FX specialists, but to give students the analytical framework to make defensible decisions about managing currency risk in a management or advisory role.

• Classic and basic theory
• New theory
• Teacher’s own research
• Methodology
• Models

• Analysis
• Discussion, critical reflection, modelling

This is an intensive 3-week course that cannot be combined with any other course.

Pre-course Activity: The course coordinator uploads the pre-course activity on Canvas at the end of May. It is expected that students participate as it will be included in the final exam, but the assignment is without independent assessment and grading.

We will use the book by Bekaert & Hodrick as our textbook. We will not go through all arguments in the textbook but discuss some of the most important.

- Bekaert, Hodrick, “International Financial Management”, 3rd edition (referenced as BH)

All material outside of the textbook will be available via CBS Canvas.