Objectives

This class provides an introduction to the principles of the foreign exchange markets, the determination of exchange rates, the nature of foreign exchange risk, and assessment of the cost of capital for foreign projects. Throughout, a number of cases are examined. The connection of the class material to current events as reported in newspapers and journals is also emphasized.

Familiarity with corporate finance and capital markets material is useful. Knowledge of elementary principles of Macroeconomics and Derivatives are helpful throughout, although necessary concepts will be developed from first principles.

Contents

The course is organized around four major parts:

• Introduction
• The Foreign Exchange Market
• Risk Management: International Financial Instruments
• World Financial Markets and Institutions

Because Finance implies calculations (valuations, risks metrics), the course will put a special emphasis on them enabling students to address the main questions and issues they will face in their professional life in Finance.

Course slides will be made available to students 1 weeks in advance of each session. They will include course supporting slides + advised readings + exercises.

References

Required Textbook:

• International Financial Management 8th edition (or newest edition is available) -Eun, CS and BG Resnick

Other (read if interested):

• Principles of International Finance and Open Economy Macroeconomics: theories, applications and policies - Cristina Terra
• Corporate Finance - David Hillier
• Options, Futures and other Derivatives - John Hull

Pre-requisites

• Financial calculations.
• CorporateFinance.
• Stochastic processes (we will review the major principles during the course).
• Derivatives pricing.
• Macroeconomics.

Evaluation

First attempt

Exam:

Written 1h30 hours

Documentation:

Allowed

Calculator:

Allowed

Evaluation:

Grading will be based on

Problem Sets and/or Case Write-ups (30%) + Final Exam (70%).

Grading is done on a relative (not absolute) basis.

Retake

Exam:

Written 1h30 hours

Documentation:

Allowed

Calculator:

Allowed

Evaluation:

Written exam, 1.5 hours, open-book, and counts for 100%