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International Finance

Опубликовано на портале: 22-06-2006
Факультет: Finance
Год: Fall 2002
Язык: Английский
Тематические разделы: Менеджмент, Финансовый менеджмент, Финансовый менеджмент: Международный финансовый менеджмент

This course applies principles of finance to the international seting. International finance is different in two basic respects. First, the existence of multiple currencies adds risk to investment and financing decisions. Second, when corporations and portfolio investors cross international borders both problems and opportunities arise. Students will focus on these issues and highlight how finance theory can be extended to address them. We will start with basic principles of international finance, then apply those principles to a variety of problems. The course will help you to understand the ideas and research results of international finance and to adapt what you learn to the practical problems on the increasingly global business world beyond the classroom.

The first part of the class outlines three basic themes: exchange rate volatility, barriers to international capital flows, and the value of international diversification.
The second part of the class presents a variety of problems, examples, and applications from the three basic themes. These will range from corporate finance applications of capital budgeting to portfolio management strategies.
This subject has few clear-cut answers or cookbook solutions. Students should be prepared to confront ambiguity, apply independent thinking, and juggle conflicting concepts and solutions in approaching the course material, lecture style, term project, and exams.

Course Materials:
Course Packet (required)
Alan C. Shapiro, Foundations of Multinational Financial Management, Allyn and Bacon, Fourth Edition (2002), Boston (optional)
Other materials to be made available online or to be distributed in class
List of Topics and Readings:
I. Introduction to International Finance
Shapiro, Chapter 1
II. The level and volatility of exchange rates
A. Background:the gold standard, fixed exchange rates
Shapiro , Chapter 3, p. 68-77
B. Basics of Exchange Rate Determination, Real Exchange Rates
Shapiro, Chapters 6, 2, 8
C. Evidence, Implications, and Problems
Pakko/Pollard, For Here or to Go: PPP and the Big Mac, FRB St. Louis Review, January/February 1996.
Wasserfallen, "The Behavior of Flexible Exchange Rates," Financial Analysts Journal 1988
Froot/Thaler, "Anomalies: Foreign Exchange," Journal of Economic Perspectives 1990
Hakkio, "Is PPP A Useful Guide to the Dolar?," FRBKC Economic Review 1992
III. Barriers to International Capital Flows
A. The nature of barriers: prohibitions, restrictions, regulations
"Philippines," in IMF Exchange Arrangements and Exchange Restrictions 1989
"The Financial Rand Market," in The Mechanics of the South African Financial System 1989
Taran/Lee/Sevilla/Chin, Capital Controls Can Strengthen Malaysias Sovereign Credit Profile, 1998, p. 1-18 (Salomon Smith Barney publication).
B. International Asset Pricing Models
C. Evidence: does the cost of capital differ across countries?
Bonser-Neal/Brauer/Neal/Wheatly, "International Investment Restrictions and Closed-End Country Fund Prices," Journal of Finance 1990
Bailey, "U.S. Money Supply Announcements and Pacific Rim Stock Markets," Journal of International Money and Finance 1990
IV. The Value of International Diversification
Shapiro, Chapter 15
Rol, "The International Crash of October 1987," Financial Analysts Journal 1988
V. Currency Futures and Options
Shapiro, Chapter 7
VI. Capital Budgeting in the International Setting
A. Motivation: motivation for investing overseas, strategies for creating value, relation to basic corporate finance principles
Shapiro, Chapter 16
B. Basics of International Capital Budgeting
Shapiro, Chapter 17, 477-487
C. Complexities Discount rate: Shapiro, Chapter 14, 400-412
Political risk: Shapiro, Chapter 17, 496-498, Chapter 5;
Dadush/Brahmbhatt, "Anticipating Capital Flow Reversals," Finance and Development 1995
Real product and production options: Shapiro, Chapter 17, 498-502
D. Practitioner viewpoints
Abuaf/Carmody, "The Executive's Guide to International Capital Budgeting," Salomon Brothers publication, 1991
James/Koller , Valuation in Emerging Markets, McKinsey Quarterly, 2000.
Hauptman/Natela, The Cost of Equity in Latin America, CSFB Publication, 1997
VII. Hedging Corporate Economic Exposure to Exchange Rates
Shapiro, Chapter 11 Garner/Shapiro, "A Practical Method of Assessing Foreign Exchange Risk," Midland Corporate Finance Journal 1984
Maloney, "Managing Currency Exposure: The Case of Western Mining," Journal of Applied Corporate Finance 1990


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