Department of Business Administration
International Financial Management 2011-2012
Course schedule: Mondays (2-5PM), as listed in the course outline.
Students taking this elective course should expect to learn the nature and purposes of international financial management, with the aim of preparing future CFOs to have a leading role in key strategic business decisions. Topics may range from financial planning and control to the sourcing and allocation of capital to the various parts of the business, taking into account financial risk and international tax planning. This semester there will be a focus on forex risk management, including currency overlays. This course is recommended for students interested in pursuing a career in finance with international companies or banks.
Lectures and seminars take place in room 2.3
Tutorials and appointments are available by prior booking through email
Details on Marques Mendes' current research interests and availability to supervise MBA and PhD thesis can be found in his personal web page.
The course employs project work as well as classroom lectures and discussions. We will make use of international as well as domestic examples. Written projects will be due for each part of the programme. Each student will be expected to participate actively in class discussions. There will be a final oral exam.
What is expected of you
Total study hours are estimated at 125, comprising 10 lectures, 9 seminars, 3 workout sessions (all with a ninety minute duration) and 105 hours of private study approximately 5 hours per week during the teaching term and the remainder devoted to revision in the examination term. The lectures will introduce the material for the course. Lectures are not compulsory, but if you are to take the course seriously and want to qualify for final oral examination you must attend a minimum of 60% of the lectures and seminars. The success of seminars and case study discussions depends on the willingness of all students to do the prior reading required on the topic to be discussed or debated. Seminars are also an opportunity to raise questions about topics not understood in the lectures or readings. All students are expected to participate in discussion. Practice in presenting an argument, putting forward a point of view and communicating orally is an important part of a students training. Formal seminar presentations of your projects should be brief and to the point.
The Course on the Internet
We will make use of the Internet for resource material and communication. Lecture materials, as available, can be downloaded from the course site on the Web. (In some cases you will need the Adobe Acrobat reader, Version 6 or higher, available free from Adobe's World Wide Web Site http://www.adobe.com/prodindex/acrobat/readstep.html.).
To keep up with the world of international finance you are encouraged to visit regularly the following Web sites:
Texts and cases
Suk H. Him, Seung Hee Kim, Kenneth A. Kim, Global Corporate Finance, Blackwell Business, 1999
Adrian Buckley, Multinational finance, 4th edition, Financial Times - Prentice Hall, 2000
José António Porfírio, Gestão Financeira Internacional, Ed. Rei dos Livros, 2003
Grading (for students with a minimum attendance of 60%)
Students failing to pass through project work and oral examination can still register for the regular written examination, but are discouraged to do so because the pass rate is usually very low.
(The links to the readings will be updated as we proceed)
The foreign exchange markets Tipology of currency markets Major currencies traded The daily value of currency transactions The infrastructure of currency markets The major banks Financial intermediaries in Forex markets Major Forex financial centers The evolution of global Forex markets The structure of FX transactions in London The Forex market in smaller markets (e.g. Lisbon+)
Price theories and FX forecasting How (and where) are exchange rates determined Central Bank interventon in currency markets Controversies about the market efficiency hypothesis Economic models of exchange rate determination The theory of purchasing power parity The Dornbusch model Different approaches to currency forecasting Who’s got the Crystal Ball? How to use currency forecasts
Preliminaries: market forecasting vs. Nature forecasting The role of money and key drivers in currency markets Central bank intervention in currency markets Different approaches to market forecasting Who has the crystal ball? An example of technical analysis: Elliott waves Economic models of exchange rate determination How to assess currency forecasts Basic rules on the use of currency forecasts How to choose forecasting methodologies
Typology of Forex risk exposures Main characteristics of various types of currency risk Exposure durations and scheduling The assessment of net exposures The material relevance of FX exposures The impact of FX changes on balance sheets Examples of account consolidation A summary of how FX changes impact on multinationals Approaches to monitoring and covering Forex risks The organization of a monitoring system
Basic rules on FX risk management Strategies and costs of risk coverage Types of currency risk Risk coverage – yes or no? A Lufthansa case study Instruments for FX risk cover Strategies of natural hedging Hedging in the forward currency market Hedging through money markets Hedging in the swaps market Hedging with currency futures and options
Before you hedge The choice of instruments The calculation of forward rates Hedging in Forex forward markets An example: par forwards Hedging through money markets Hedging with swaps Typology of currency swaps Hedging with currency options Comparing hedging instruments.
What is a Currency Overlay? Who can “buy” currency overlays? Why central banks? Don’t they have their own currency experts? What do we need to know before launching a currency overlay programme? Instruments used in a currency overlay strategy How to implement a currency overlay programme?