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AC.F305: International Financial and Risk Management


Department: Accounting and Finance NCF Level: FHEQ/QCF/NQF6//RQF6
Study Level: Part II (final year) Credit Points: 15.0
Start Date: 09-10-2017 End Date: 11-05-2018
Available for Online Enrolment?: Y Enrolment Restriction: Fully available to all students
Module Convenor:

Syllabus Rules and Pre-requisites

  • The student must take 1 modules from the following group:
  • The following modules may not be taken:

Curriculum Design: Outline Syllabus

  •    

    The main course textbook is:

    Sercu, Piet, 2009, International Finance: Theory into Practice, 1st edition, Princeton University Press, Cambridge, NJ, ISBN-10: 069113667X,ISBN-13: 978-0691136677.

     

    Week 1: International Finance: Institutional Background (Money; Balance of Payments; Exchange Rate Regimes) Reading:

    • Sercu (2009), Chapter 2. [E]
    • Wolf, M. (2010), “Could the world go back to the gold standard?”, Financial Times Blog, 1 No- vember 2010. [R]
    • The Economist (2011), “Currency interventions: Francs for nothing”, The Economist, 10 Sep- tember 2011. [R]

     

    Week 2: Spot Markets for Foreign Currency

    (Exchange Rates; Markets for FX; the Law of One Price; Purchasing Power Parity)

    Reading:

    • Sercu (2009), Chapter 3. [E]
    • The Economist (2013), “The Big Mac index: Value meal”, The Economist, 13 July 2013. [R]
    • Rogoff, K. (1996), “The Purchasing Power Parity Puzzle”, Journal of Economic Literature 34(2), 647-668. [R]

     

    Week 3: Understanding Forward Exchange Rates for Currency

    (Forward Contracts; Relation between FX and Money Markets; Covered Interest Parity; Market Value of an Outstanding Forward Contract)

    Reading:

    • Sercu (2009), Chapter 4. [E]
    • Froot, K.A. and Thaler, R.H. (1990), “Anomalies: Foreign Exchange”, Journal of Economic Per- spectives 4(3), 179-192. [R]
    • Green, P. (1992), “Is Currency Trading Profitable? Exploiting Deviations from Uncovered Inter- est Parity”, Financial Analysts Journal 48(4), 82-86. [O]

     

    Week 4: Using Forward Contracts for International Financial Management

    (Forwards in Real-World Markets; Using Forwards to Hedge, Speculate and to Minimize the Im- pact of Market Imperfections)

    Reading:

    • Sercu (2009), Chapter 5. [E]
    • The Economist (2009), “Corporate hedging gets harder: The perils of prudence”, The Econo- mist, 18 June 2009. [R]

     

    Week 5: The Markets for Currency Futures and Swaps

    (From Forwards to Futures; Hedging with Futures; Swap Contracts)

    Reading:

    • Sercu (2009), Chapters 6 & 7. [E]
    • Kritzman, M. (1991), “What Practitioners Need to Know...About Regressions”, Financial Ana- lysts Journal 47(3), 12-15. [O]

     

    Week 6: Currency Options

     

    (Basics; Jargon and Institutional Features; Arbitrage Relations; Hedging)

     

    Reading:

     

    • Sercu (2009), Chapter 8. [E]
    • Kritzman, M. (1992), “What Practitioners Need to Know...About Currencies”, Financial Ana- lysts Journal 48(2), 27-30. [R]

     

     

     

    Week 7: Rationales for Corporate Hedging and Measuring Exposure

     

    (Relevance of Hedging; Risk & Exposure; Hedging Contractual, Operating and Accounting Expo- sures)

     

    Reading:

     

    • Sercu (2009), Chapters 12 & 13. [E]

     

     

     

    Week 8: Cost of International Capital – the International CAPM (International Capital Budgeting; Single-country CAPM; InCAPM) Reading:

     

    • Sercu (2009), Chapter 19. [E]
    • Stulz, R.M. (1999), “Globalization, Corporate Finance, and the Cost of Capital”, Journal of Ap- plied Corporate Finance 12(3), 8-25. [R]
    • Solnik, B.H. (1974), “The International Pricing of Risk: An Empirical Investigation of the World Capital Market Structure”, Journal of Finance 29(2), 365-378. [O]

     

     

     

    Week 9: International Capital Budgeting

     

    (Domestic Capital Budgeting; ANPV & WACC; International Capital Budgeting)

     

    Reading:

     

    • Sercu (2009), Chapter 21. [E]

     

     

     

    Week 10: Course Summary, Exam Info & Solution to Coursework Assignment

     

    Reading:none

     

     

Curriculum Design: Single, Combined or Consortial Schemes to which the Module Contributes

  • Any AcF-adminstered degree except Accounting and Management Studies.

    All joint degrees with Economcis, Mathematics and Computer Science.

    Any other degree within which students have taken the pre-requisite of acF 214 (M or L)

  • 75% Exam
  • 25% Coursework

Assessment: Details of Assessment

  • This module provides knowledge that is important to those concerned with financial management in a multinational setting. Areas covered include the relationships between exchange rates, interest rates and inflation rates, forward, futures and options markets, and corporate exchange rate risk management.

Educational Aims: Subject Specific: Knowledge, Understanding and Skills

  •  

     

    • To describe the structure of the international monetary system.
    • To analyse the relationships between interest rates, inflation rates and exchange rates.
    • To explain the main determinants of exchange rate movements and their interaction.
    • To deepen the understanding of derivatives valuation by applying basic concepts to foreign exchange futures, options and other related instruments.
    • To explain the use of foreign exchange derivatives in the context of corporation risk management.
    • To analyse the relationships between other risk factors, e.g. equity price risk, credit risk and liquidity risk.
    • To provide guidelines for corporate financial decision making in an international context.

     

     

     

     

Educational Aims: General: Knowledge, Understanding and Skills

  • By the end of the course, students should

    • be able to give reasoned analyses of developments in international financial markets,
    • be familiar with the valuation of foreign exchange futures, options and other related financial instruments,
    • understand the objectives of exchange-rate and other forms of risk management,
    • be familiar with the fundamentals of financing and investing in international financial markets.

Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

  • By the end of the course, students should

    • be able to give reasoned analyses of developments in international financial markets,
    • be familiar with the valuation of foreign exchange futures, options and other related financial instruments,
    • understand the objectives of exchange-rate and other forms of risk management,
    • be familiar with the fundamentals of financing and investing in international financial markets.

     

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