International Financial Management

Course Code: FIN 422

Credit Hour: 3

Course Group: Specialization Course: Finance

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Markets and Linkages in International Financial Management: Themes of This Course--The Tasks of the International Financial Manager--What Are the Global Financial Markets?--Dealing Room: Foreign Exchange and Eurocurrency--Dealing and Quotations--The Mechanics of the Eurodollar Market--Arbitrage Between the ForeignExchange and Eurocurrency Markets--Capital Controls and Divided Credit Markets--Competing Eurocurrency Markets: Interest-Rate Arbitrage and Currency Expectations--Forward-Exchange Rates, Relative Interest Rates, and Exchange-Rate Expectations.

Exchange Rate Systems and Policies: Exchange-Rate Systems: The Choices--Multiple Exchange Rates, Black Markets and International Financial Management--The Adjustment Process and the Financing/hedging Decision-- Repercussions of an Overvalued Currency--The European Monetary System.

Currency Forecasting: The Corporate Viewpoint: Should Corporations Forecast? --Theories of Exchange Rate Determination--Fundamental Models in Forecasting-- in a Fixed-Rate System--Technical Models--Evaluating the Performance of the Forecasters--Efficient Markets--Risk Premium and Hedging--Tests of Market Efficiency.

Using Forward Exchange Markets and Money Market Hedging: The Forward Contract--Link to the Money Market--Money Market Hedging--No transferability and Reversal of Forward Contracts--Forwards in Hedging-- Forwards in Speculation--Forwards in Arbitrage--Long Dated Forwards.

Transactions Hedging: Forwards vs Futures vs Options: Does Currency Risk Matter? --When Should Corporations Hedge? --Forward Hedging vs Money Market Hedging--Currency Futures, Margin and Marking to Market--Futures vs Forwards vs Options: A Roadmap.

Corporate Uses and Corporate Abuses of Currency Derivatives: Abuses of Options and Other Derivatives-- Currency Options--Who Needs Them? --Options Combinations--Put-Call Parity--Currency Option Pricing--Three Versions of Volatility in the Context of Corporate Hedging--Trading Volatility: Straddles and Strangles--Currency Collars--Diff Swaps--Exotic Options as Hedging Vehicles.

Currency Risk: Accounting vs Economic Exposure: Accounting or Translation Exposure--Cash Flow Effects: Economic Exposure--The Currency of Determination--Transactions Exposure--Methods of Translation for Balance Sheets.

Risk Management: New Approaches: The Value-At-Risk Approach: an Overview--Why Performance Needs to Be Related to Risk--Measuring Positions in Tradable Instruments Held by Financial Institutions and Relating Them to Key Market Variables Such as Changes in the Level and Shape of the Yield Curve, Exchange Rates and Equity Indices--Using Estimated Probability Distributions to Forecast the Overall Portfolio Risk of a Set of Positions-- Application to Corporate Foreign Exchange Risk Management.

International Taxation and Transfer Pricing: Comparative Tax Systems--Corp. Vs. Personal Tax--Tax Systems--U.S. Taxation of Foreign Income--Worldwide Principle--Deferral and Credit--Passive Income--Transfer Pricing.

International Capital Budgeting: Strategic FDI Decision vs. Project Appraisal--NPV, IRR, NTV, TRR--Special Risks & Risk Analysis in ICB--Tax and Repatriation--Subsidies, Incl. Low-Cost Finance--Inflation and Exchange Rate Changes--Whose Cash Flow? --Blocked Funds.

Swap Financing Techniques: The Economics of Swaps--Credit Market Imperfections--Bond Market Redundancy-- How Swap Rates Are Determined--Basis Point Equivalents and the All-in Swapped Cost of Capital--Valuation and Termination of Swaps--Off-Market Swaps--Trading Swaps-- Versus Long-Dated Forwards--The Credit Risk of Swaps--Swaptions, Caps and Floors.

The International Bond Market: Eurobonds, Domestic Bonds and Foreign Bonds--Factors Segmenting Domestic and Eurobond Markets--Private Placements and Rule 144A--Regulation and Taxation--New Issue Procedures-- Equity-Linked Eurobonds--Asset-Backed Eurobonds.

Long Term Financing with Eurobonds and Hybrid Instruments: Understanding Hybrid Instruments: The Building Block Approach--Hedging and Managing New Instruments: The Functional Method--Hybrids in Corporate Financing.

Integrated Financing Decisions: From "How Much Debt?" to "What Kind of Debt?"--Fixed versus Floating Debt-- Maturity and Availability--Financing and the Exchange Risk Factor--The Use of Swaps, Caps and Hybrids in Financing--A Roadmap for Financing Choices.

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TEXTBOOKS:

Jeff Madura, International Financial Management, 6th ed., ITP, 2000 (required); and Madura & Schnusenberg, Study Guide, ITP, 2000