Syllabus
This course is an introduction to International Finance. It consists of two, not necessarily equal, parts. In the first part we will cover the various financial instruments that are used in international financial markets. Once students have developed a familiarity with these instruments, we will show how these instruments can be used to solve important international business problems.
Required Texts: International Finance and the Firm by Piet Sercu and Raman Uppal.
Harvard Case packet.
Optional Reading: The Economist, New York Times, Wall Street Journal, Financial Times
Reading: You should always reinforce the lectures by doing the assigned readings. Every student is also expected to keep abreast of the current state of the international financial markets. One way to do this is by reading, on a regular basis, one of the optional publications suggested above.
Exams: There will be a mid-term exam and a final exam. The mid-term will provide you with an early signal on how you are doing in the course. It will be held on October 23 and it will be reviewed in the following lecture.
Term Project: A significant portion of your grade will be determined by your performance on the term project. Students will be divided into groups. Students in each group will demonstrate their knowledge of basic international finance by applying the concepts in this course to an interesting business problem. Each group will be expected to share their insights by formally presenting the problem to the class. A requirement of the presentation is that all students within a group make a substantive contribution during the presentation. Finally, following each presentation, each group will provide a type written report of their findings. 50% of the grade on the term project will be determined by the presentation and the other 50% by the report. All reports are due at with the final exam. Any report that is handed in after this date will not graded and will be assigned a grade of zero. It is up to you to find a group. Each group should hand in a list of its members by the beginning of class on September 11. Since no two groups may do the same topic, at least two topics should be selected and turned in by the beginning of class on September 18. On October 2, each group will submit a proposal of no more than 250 words that describes the term project. A group's grade on the term project will be reduced by 20% for each day this proposal is late.
Homework: Four homework assignments will be required in the first half of the course. They are due at the beginning of class on the dates specified in the syllabus. In addition to this homework, there are a number of cases that every student is required to prepare. Your classroom participation grade will be reduced significantly if at any time it becomes clear that you have not satisfied this requirement The only effective way to prepare for the final exam is to do the homework and prepare the cases. Thus, I would encourage you to form study groups to do and review the homework and cases.
Grades: Your final grade will be determined by your classroom participation as well as your performance on the midterm and final exams, the term project, and the homework. The actual percentages are:
Midterm Exam 25%
Final Exam 25%
Term Project 15%
Homework 20%
Classroom Participation 15%
Policy on late assignments: Late assignments will not be graded and will be assigned a grade of zero. Since all deadlines are known on the first day of classes there is no reason for late assignments.
Course Outline
Note: All readings refer to International Financial Markets and the Firm.
Monday, August 28
(i) Lecture:
Introduction to FX markets, Arbitrage, Forward Contracts
(ii) Reading:
Preface- Into. to Int. Fin. Mark.
Chapter 1- Spot Exchange
Monday, September 11
(i) Lecture:
Arbitrage, Forward Contracts, Interest Rate Parity
(ii) Reading:
Chapter 2- Forward Contracts
Chapter 4 - Market imperfections
(iii) Lists of term project groups due. (Any student not on a list will be assigned to a group after this date.)
Homework 1 due.
Monday, September 18
(i) Lecture:
Implied Forward Contracts, Swaps
(ii) Reading:
Chapter 3 - Value of a Forward Contract
Chapter 10 - Swaps
(iii) Proposed term project topics due. (Any group without a project will be assigned one.)
Monday, September 25
(i) Lecture:
Futures, Options
(ii) Reading:
Chapter 5- Futures
Chapter 6-Options
(iii) Group Presentation dates determined.
Homework 2 due.
Monday, October 2
(i) Lecture:
Currency Option Pricing
(ii) Reading:
Chapter 7,8 -Option Pricing Models
(iii) Term project proposals due.
Homework 3 due.
Monday, October 16
(i) Lecture:
Case Study - Walt Disney Co.
(ii) Reading:
HBS Case 9-287-058
(iii) Homework 4 due.
Monday, October 23
(i) Lecture:
Midterm Exam
Monday, October 30
(i) Lecture:
Midterm Exam Review, Purchasing Power Parity
(ii) Reading:
Chapter 11 - Purchasing Power Parity
Monday, November 6
(i) Lecture:
Case Study - Bank for International Development
Risk and Return in Forward Markets
(ii) Reading:
HBS Case 9-289-034
Chapter 14- Risk and Return in Forward Markets
Chapter 15- Forecasting Exchange Rates
Monday, November 13
(i) Lecture:
Case Study - Gaz De France.
(ii) Reading:
HBS case 9-288-030
Monday, November 20
(i) Lecture:
The Relevance of Hedging
Case Study - Jaguar plc.
(ii) Reading:
Chapter 16- The Relevance of Hedging
HBS case 9-290-005
Monday, November 27
(i) Lecture:
Presentation of Term Projects
Monday, December 4
(i) Lecture:
Presentation of Term Projects
Term Project Write ups Due with the Final Exam