FIE433 International Finance

• Topics

  FIE433 provides an introduction to international finance. We study the functioning of international financial markets, focusing on various foreign exchange risk management tools. Another part of the course deals with international portfolio diversification and asset pricing. We will moreover cover investment and financing decisions of firms that operate in an international environment. Special emphasis will be placed on how corporations assess and hedge their currency exposure. The course is built around the following three areas:

  1. Introduction to international finance: exchange rates, exchange rate systems, exchange rate risk, forward and futures markets, foreign exchange derivatives: foreign currency swaps.

  2. International asset pricing: parity conditions (covered and uncovered interest rate parity, purchasing power parity), exchange rate determination and forecasting, speculation in the foreign exchange market (carry trade).

  3. International corporate finance: international capital budgeting, measuring and hedging exchange rate risk, international debt and equity financing.

• Learning outcome

  Upon successful completion of the course, students will be able to:

  Knowledge

  • Grasp key theoretical concepts of international finance.
  • Use recent empirical evidence to critically reflect on key theoretical concepts and international asset pricing puzzles.
  • Gain in-depth understanding of international financial instruments and international financial markets for debt and equity.
  • Critically evaluate problems inherent in the international monetary system.

  Skills

  • Assess optimal international portfolio decisions.
  • Assess and hedge a firm's currency risks.
  • Analyze a firm’s decision whether to fund investment via foreign-currency or domestic currency claims.
  • Estimate a firm's international cost of capital.

  General Competence

  • Use the ideas and techniques of financial economics and international finance to deal with applied real-world problems.

• Teaching

  Teaching consists of lectures and tutorials taught in person. Lectures will not be recorded.

• Recommended prerequisites

  There are no formal prerequisites. Students are expected to be familiar with basic finance and economics concepts (e.g. NPV; capital asset pricing model; discounted cash flow techniques;arbitrage principle). Such concepts are covered in FIE400 and FIE402.

• Credit reduction due to overlap

  None.

• Compulsory Activity

  Up to four written homework assignments will be submitted in groups. The number of assignments depends on class interests, needs, and available time. Group sizes will be announced at the beginning of the semester. Students will be assigned into groups by the instructor. Students will be required to submit all assignments as part of the group they are assigned to. Course approval from prior semesters are not valid.

• Assessment

  A three-hour individual pen-and-paper school exam (100%). The exam will be written in English. Students are required to answer the exam in English.

  Course approval from prior semesters are not valid.

• Grading Scale

  A-F

• Literature

  Self-contained lecture slides serve as the main reference. The textbook for the course is "International Financial Management" by Geert Bekaert and Robert Hodrick 3rd edition. Cambridge University Press. ISBN: 9781107111820

• Permitted Support Material

  Calculator

  One bilingual dictionary (Category I)

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programs at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https:// www.nhh.no/en/for-students/examinations/examination-support-materials/