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IF-I-P09
(PGDM 2009-11: Term- IV)

INTERNATIONAL FINANCE-I

Instructor: Dr. Sushanta Mallick
http://webspace.qmul.ac.uk/skmallick/

School of Business and Management

Queen Mary, University of London


OFFICE: Room # [Tel. Ext. # ]; Office Hours: Open Door Policy – Walk in whenever my office door is open; Power point lecture slides will be made available in every lecture.

Aim of the module:
The aim of this module is to develop an understanding of topics in international finance, viewed primarily from the perspective of managers doing business overseas, namely the management of foreign exchange exposure, multinational investment decisions with regard to fixed interest securities, equity markets, interest rates and exchange rates, international risk diversification and global asset allocation structures. It also involves the understanding of the macroeconomic environment governing international business.

Learning Outcomes:
On completion of this course, students should have gained understanding of the following topics: the international financial systems, the opportunities in international investments, the risk-return trade-off in international investments, the financing options available to multinational financial manager, the relevance of hedging in the management of currency risk, and international risk diversification. Students should be able to learn the importance of international financial theories to finance practitioners; write well constructed essays using balanced economic arguments; critically evaluate relevant information from a variety of sources; acquire numerical and problem-solving skills required by managers in the context of globalization and the growing integration of the international economy.

Module Outline:
Topic 1: The Internationalization of Business and Finance
Globalization and the Multinational Corporation; International Financial markets – The foreign exchange market and currency risk management.

Topic 2: The International Monetary System
A Brief History of the International Monetary System; The European Monetary System and Monetary Union

Topic 3: Exchange rate regimes: Fixed or Floating?
Alternative Exchange Rate Systems in the emerging world; Emerging Market Currency Crises; The choice of exchange rate regime

Topic 4: The determination of Exchange Rates
Setting the Equilibrium; Spot Exchange Rate; The Equilibrium Approach to Exchange Rates; Expectations and the Asset Market Model of Exchange Rates

Topic 5: Exchange Rate Policy and Government Influence on Exchange Rates
The Fundamentals of Central Bank Intervention: Intervention as a Policy Tool; Financial Crises in emerging markets

Topic 6: Parity Conditions in International Finance
International Parity Conditions – Arbitrage and the Law of One Price; Purchasing Power Parity; The Fisher Effect; The International Fisher Effect: Relationship between Inflation, Interest Rates, and Exchange Rates. Interest Rate Parity Theory: The Relationship between the Forward Rate and the Future Spot Rate.

Topic 7: The Balance of Payments and International Economic Linkages
The Balance of Payments Categories; The International Flow of Goods, Services, and Capital; Coping with the Current-Account Deficit.

Topic 8: Forecasting exchange rates
Currency Forecasting; Forecast Techniques: Efficient Markets Approach, Fundamental Approach, and Technical Approach; Forecasting in Practice

Topic 9: Country Risk Analysis
Political Risk Assessment and Management; Measuring Political Risk; Economic and Political Factors Underlying Country Risk; Country Risk Analysis in International Banking

Topic 10: Foreign Exchange Exposure: Risk, Measurement and Management
Hedging foreign exchange risk – Transaction Exposure, Economic Exposure, Translation Exposure; currency and interest rate derivatives

Topic 11: Multinational Financial Management
Multinational Capital Structure and the Cost of Capital; Transfer Pricing and International Taxation; Cross-Border Mergers and Acquisitions, and Capital Budgeting

Assessment:

The overall grade will be based on a mid-term test (20%) and an end-term test (80%). Both tests will take the form of short-answer type and essay type questions including numerical questions.

READING LIST

Required Text Books:

1. Eun, Cheol S. and Bruce G. Resnick (2009), International Financial Management, 5th edition, McGraw-Hill/Irwin.
2. Shapiro, A.C. (2009), Multinational Financial Management, International Student Version, 9th Edition, August 2009.


Supplementary Text Books:
3. Bekaert, G., and R. Hodrick (2008), International Financial Management, Prentice Hall.
4. Connolly, Michael (2007), International Business Finance, Routledge.
5. Copeland, L. (2008), Exchange Rates and International Finance, 5th Edition, FT Press.
6. Eiteman, D.K., A.I. Stonehill & M.H. Moffett (2009) Multinational Business Finance, 12th Edition, Prentice Hall.
7. Madura, J. (2009), International Financial Management, 9th Edition, South-Western / Cengage.
8. Pilbeam, K. (2006), International Finance, 3rd edition, Palgrave/Macmillian.

Additional Reading:

Baldwin, R., and C. Wyplosz (2009), The Economics of European Integration, 3rd edition, McGraw-Hill

de Grauwe, Paul (2009), The Economics of Monetary Union, 8th Edition, OUP.

Further reading materials will be assigned during the course. In addition to lecture notes and the assigned texts, students are encouraged to consult other related materials, including journal articles, in international finance.

Relevant Journal Articles

Rogoff, K. (1996), The purchasing power parity puzzle, Journal of Economic Literature, 34 (2): 647–68.

Sarno, L., and M.P. Taylor (2002), Purchasing power parity and the real exchange rate, IMF Staff Papers, 49 (1): 65–105.

Mallick, S. K. and Marques, H. (2008) Exchange rate transmission into industry level export prices: A tale of two policy regimes in India, IMF Staff Papers, 55 (1): 83-108. [Download from my website: http://webspace.qmul.ac.uk/skmallick/ ]
Created By: Debasis Mohanty on 05/10/2010 at 03:14 PM
Category: PGDM-II Doctype: Document

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