FINC 439: International Finance
Prerequisite: FINC 331 or Instructor Permission
Credit Hours: (3)
Deals with the international dimension of business finance with a focus on the globalization of financial markets.
Detailed Description of Content of Course
(1) The Overview of International Finance
(a) The Importance of International Finance
(b) The Rewards and Risks of International Finance
(c) Globalization and the Multinational Enterprise
(d) Corporate Governance in an International Setting
(2) The Global Financial Environment
(a) The International Monetary System
(b) The Balance of Payments
(c) The Euro
(d) International Currency Crises
(3) Introducing the Foreign Exchange Markets
(a) The Spot, Forward, and Swap Markets and Transactions
(b) Foreign Exchange Rates and Quotations
(c) Eurodollars and Eurocurrencies
(d) Calculating Changes in Spot and Forward Rates (Direct and Indirect Quotes)
(e) Cross Exchange Rates and Triangular Arbitrage
(4) International Parity Conditions
(a) The Law of One price
(b) Purchasing Power Parity (PPP)
(c) Uncovered and Covered Interest Rate Parity
(e) Exchange Rate Pass-Through
(5) Foreign Exchange Rate Determination and Forecasting
(a) Supply and Demand of Currencies
(b) Fundamental Approach
(c) Efficient Market Approach
(d) Technical Approach
(6) Foreign Currency Derivatives
(a) Hedging versus Speculating
(b) Currency Futures, Options and Trading
(c) Currency Options and Trading
(7) Foreign Exchange Risk and Exposure
(a) Transaction Exposure and Hedging
(b) Operating Exposure and Hedging
(c) Translation Exposure
(8) Financing the Global Firm
(a) Global Cost of Capital
(b) International Debt
(c) Global Capital Structure
(9) International Portfolio Theory and Diversification
(10) Multinational Capital Budgeting
(11) Foreign Direct Investment Theory and Strategy
Detailed Description of Conduct of Course
FINC 439 is taught primarily as a lecture-discussion course. Text materials will be supplemented with outside readings. Quantitative Techniques will be introduced or reviewed as needed. A semester project may be required. Students will use electronic spreadsheets to facilitate analysis.
Goals and Objectives of the Course
Having successfully completed the course the students will be able to:
1. Understand the global financial environment in which MNE’s operate.
2. Explain the operation of foreign exchange markets, spot and forward.
3. Analyze the future path of foreign exchange rates.
4. Plan appropriate strategies for hedging foreign exchange risk.
5. Plan appropriate strategies for international project and cash management.
6. Determine the appropriate relative amounts of debt and equity financing for the multinational firm.
The students will be evaluated on their performance on class examinations, term paper(s), assignments, and class participation.
Other Course Information
Review and Approval
DATE ACTION APPROVED BY
February 2010 Reviewed Dr. Dan Davidson, Chair