International Finance, FINC 562

Spring 2011   Professor Martin Evans

 

Prerequisite  Financial Markets FINC 551

Description:  This module is about the international financial markets and their financial instruments. The central themes are currency exchange rates, related derivative securities and international asset allocation. This module is designed from the viewpoint of someone that participates in the international financial environment, whether this person is a CFO, General Manager or Treasurer of an international firm, an investment banker, an investor, or a consult.

 

Office hours: TBA at first class

Email: evansm1@georgetown.edu

Phone: 202-687-1570

Module mechanics: The module comprises of 7 weekly meetings. Classes will be mixed between a lecture format, case presentations, and case discussions. There are three cases.

 

Grading: Your Grade for the Module will be apportioned as follows:

¥    Final Exam (Take Home)        50%

¥    Cases                                      40%

¥    Class Participation                   10%

The final exam is cumulative and will cover all material in the module. Questions will be both qualitative and quantitative. Class participation will be judged according to your contribution to the class, not the number of comments.

Groups for cases: For the cases, students will form groups of maximum size four.  Each group will submit a write-up for the cases.  Every student in the group must retain a copy of the write-up and bring it to the class where the case is discussed. As with actual practice in business, all of the cases are written to focus on issues, not answers, and as such are ambiguous.  There are often no Òright answersÓ to cases, only good arguments and bad arguments for taking particular actions or decisions.  There is sometimes a limited amount of quantitative information on which to make a decision and thus it is often impossible to compute a precise numerical answer, as might be done in other finance courses.  Groups will also be asked to prepare a (short) presentation on a particular aspect of cases.

Reading: The text for the course is a customized version of International Financial Management, 5Õth Edition, by Eun and Resnick. Instructions on how to obtain an electronic copy of the text are available on this Blackboard site.  Lecture notes, any additional readings, and case instructions will also be made available via Blackboard.

Class Attendance and Academic Honesty: All students are expected to adhere to the MSB policy on class attendance and to strictly abide by the MSB honor code.

 

 

 

 

Agenda

 

Date

Topic

Readings*

Case Preparation

Jan 11th.

1.     Introduction

2.     The International Monetary System

3.     The Balance of Payments

4.     International Debt Dynamics

Chapters 1 & 2.

Case 1: Foreign Direct Investment and Irelands Tiger Economy

Jan 18th.

1.     The Foreign Exchange Market

2.     Spot and Forward Rates

3.     Case 1: Presentations

Chapter 3.

Case 2: Murphy and Sons

Jan 25th.

1.     Exchange Rate Determination

2.     International Parity Conditions

3.     Case 2: Presentations

Chapter 4.

Case 3: Groupe Ariel S. A. Parity Conditions

Feb 1st.

1.     International Equity Markets

2.     Portfolio Investment

3.     Case 3 Presentations

Chapters 8 & 9.

Case 4: Innocents Abroad: Currencies and International Stock Returns

 Feb 8th.

1.     Hedging with Forwards

2.     Hedging with Futures

3.     Case 4: Presentations

Chapters 5 (on Futures), 6 & 7.

Case 5: Lufthansa

Feb 15th.

1.     Pricing Currency Options

2.     Hedging with Currency Options

3.     Case 5: Presentations

Chapter 5 (on Options)

Case 6: Porsche Exposed

Feb 22th.

1.     International Capital Structure and the Cost of Capital

2.     International Capital Budgeting

3.     Case 6: Presentations

 

Chapters 10 & 11.

 

 

* Note that the chapters numbers refer to the chapters in the customized text. NB