Syllabus
MBA 774
International Finance
Spring 2012
Instructor
:
Dr. D.K.
Malhotra
Office
: 102 Tuttleman
Office Phone
: (215) 951-2813
Office Hours
: 10:00 a.m. - 11:30 a.m. Mondays and Wednesday or by appointment.
Web Address
:
http://faculty.philau.edu/MalhotraD
Email
: MalhotraD@philau.edu
Required Text:
Multinational Financial Management
by Alan C. Shapiro, ninth edition, John Wiley and Sons, ISBN#978-0-470-41501-6.
Additional Recommended
Financial
Times
The Wall Street Journal
Euromoney
Asiamoney
Business Week
The Economist
Course Description:
This course will examine international financial economics and the
international financial system, with emphasis on the theories, techniques, and
practices relevant to international financial management. Topics include balance
of payments, foreign exchange markets and risk, cash flow operations, and
portfolio effects of capital budgets for multinational and international capital
markets. Students will explore problems involved in the financial management of
multinational firms including environmental problems, organizing for optimal
results, sources and uses of funds, and accounting, tax, and control issues.
Prerequisite: All students must have completed MBA 629.
It is the students' responsibility to make certain that they have
successfully completed these courses. If at any time during the semester it is
learned that a student has not successfully completed these prerequisites,
he/she will be dropped from the course receiving, neither credit nor tuition
refunds.
Course Objective:
The objective of the course is to teach students how to approach and solve
the fundamental financial problems facing multinational corporations. Each topic
explored in the course represents a real-life financial problem facing a
multinational "firm". Much of what the students will learn currently is in use
in firms across the nation and other countries. Projects and case studies have
been included to ensure better understanding of the subject matter.
Requirements:
1. Attend class regularly
2. Do homework
3. Study class notes prior to next class and come prepared to the class to
participate actively in discussions
4. Be able to take time pressure tests
Attendance:
Attendance is mandatory. You are responsible for what is covered in the
class and any absence on your part leaves you responsible for finding out what
was presented in class. You will benefit a lot from the course by doing problems
and reviewing concepts, which are covered in the class.
Grading:
Case
Analysis
15%
Mid-term
Exam
30%
Final
Exam
35%
Country
Risk Analysis
10%
Class
Participation
10%
No late homework will be accepted. No makeup exams will be given. If you miss an
exam due to an unavoidable reason, the grade on the missed exam will be
transferred to the final exam. THE FINAL EXAM IS COMPULSORY AND COMPREHENSIVE.
DO NOT EXPECT ANY SCALING ON THE GRADES.
Academic Honesty:
Students are expected a code of honesty which prohibits cheating on the test and
plagiarizing others' work. Violation of this code may result in failure of the
course.
Grading Policy:
The following grading policy will be followed for assigning a letter
grade in this course.
93 and above A
90-92 A-
87-89 B+
83-86 B
80-82 B-
77-79 C+
73-76 C
70-72 C-
Less than 70 F
TENTATIVE
COURSE OUTLINE:
01/14
Introduction to Multinational Financial Management
Ø
The Rise of
Multinational Corporation
Ø
The Process
of Overseas Expansion
Ø
Multinational Financial Management
01/18
The Foreign Exchange Market
Ø
Organization
of the Foreign Exchange Market
Ø
The Spot
Market
01/21
The Foreign Exchange Market
Ø
The Forward
Market
Ø
Arbitrage
01/25
Exchange Rate Determination
01/28
Parity Conditions in International Finance
Ø
The
Purchasing Power Parity
Ø
The
International Fisher Effect
02/01
Parity Conditions in International Finance
Ø
Interest
Rate Parity Theory
02/04
International Monetary System
Ø
Alternative
Exchange Rate Systems
Ø
Fixed
Exchange Rate System
Ø
Floating
Exchange Rate System
Ø
EURO
Mid-term
Exam
02/08
International Monetary System
Ø
Currency
Board/Pegged Exchange Rate System
Ø
Government
Intervention in Currency Markets
02/11
Currency Futures and Options
Ø
Futures
Contracts
Ø
Currency
Options
02/15
Currency Futures and Options
02/18
Exchange Rate Risk
Ø
Meaning of
Exchange Rate Risk
Ø
Types of
Exchange Rate Risks
Ø
Measurement
of Exchange Rate Risk
02/22
Measuring Transactions, Accounting, and Economic Exposure
Ø
Measurement
of Transaction Exposure
Ø
Measurement
of Translation Exposure
02/25
Management of Transaction, Accounting, and Economic
Exposure
Ø
Management
of Transaction Exposure
Ø
Management
of Translation Exposure
Ø
Management
of Economic Exposure
02/29
Management of Exchange Rate Risk
03/03
Foreign Direct Investment
Additional Recommended
Chrystal, K. Alec. "A Guide to Foreign Exchange Markets." Federal Reserve Bank
of
Madura, Jeff, and E. Theodore Veit. "Use of Currency Options in International
Cash Management." Journal of Cash Management, January-February 1986, 123-126.
Popper, Helen. "Long-term Covered Interest Parity: Evidence from Currency
Swaps." Journal of International Money and Finance, August 1993, 439-448.
Abuaf,
Niso, and Philippe Jorion. "Purchasing Power Parity in the Long Run." Journal of
Finance, March 1990, 157-174.
Fung,
Hung-Gay and Wai-Chung, Lo. "Deviations from Purchasing Power Parity." Financial
Review, November 1992, 553-570.
Huang, Roger. "Risk and Parity in
Purchasing Power." Journal of Money, Credit, and Banking, August 1990, 338-356.
Bodnar, Gordon M., and William M. Gentry. "Exchange Rate Exposure and Industry
Characteristics: Evidence from
Flood,
Eugene and Donald R. Lessard. "On the Measurement of Operating Exposure to
Exchange Rates: A Conceptual Approach." Financial Management, Spring 1986,
25-36.
Hung,
Juan. "Assessing the Exchange Rate's Impact on
Westerfield, Janice M. "How
Yang,
James. "Managing Multinational Exchange Risks." Management Accouting, February
1986, 45-52.
Aggarwal, R. "Investment Performance of U.S.-Based Multinational Companies:
Comments and a Perspective on International Diversification on Real Assets."
Journal of International Business Studies, Spring-Summer 1980, 98-104.
Fatemi, Ali. "Shareholder Benefits from Corporate International
Diversification." Journal of Finance, December 1984, 1325-1344.
Stulz,
Rene. "On the Determinants of Net Foreign Investment." Journal of Finance, May
1983, 459-468.
Booth,
Laurence. "Capital Budgeting Frameworks for the Multinational Corporation."
Journal of International Business Studies, Fall 1982, 114-123.
Kim,
Suk H., Edward Farragher, and Trevor Crick. "Foreign Capital Budgeting Practices
Used by the
International Finance
MBA 774
Country Risk Analysis
Spring 2012
Due Date: March 3, 2012
You work as
a junior analyst with a multinational firm. Your firm is think of
expanding into a new country. You have been asked by your boss at the firm
to analyze a country (of your own choice) and submit a report to him stating
whether that your company should expand into that country or not so that your
boss can make appropriate changes in his strategy accordingly. You should
provide a recommendation, which "YOU" think, is correct and not what other
"experts" think is correct.
· You must provide the name of the country that you want to analyze by January
21, 2011.
· You may not be able to change the country for your project after the initial
selection.
· You must submit the project by the due date. If you do not submit the project
by the due date, you will lose three points from the score for your project.
· If you choose not to do the project, you will receive an "F" in this course.
Your report should be organized along the following lines.
Format:
1. Your
report should start with a clear-cut recommendation as to whether we should
expand into that country along with a summary of the reasons
2. Discuss each and every reason in detail.
3. Attach a copy of all your sources of information to substantiate your
arguments.
Your report should not exceed ten pages (excluding supporting documents). Your
reports will be graded on the basis of logical reasoning, completeness, and the
appropriateness of your writing strategy. Since this is a professional report,
it requires the use of a non-sensitive message; the tone of your report should
be direct, professional, and non-emotional.
Consult a Business Communications book to learn more about writing a
business/project report.
Sources of Information for Your Project:
1. Euromoney
2. Asiamoney
3. Business Week
4. Lexis-Nexis
5. Dept. of Commerce Reports on Individual Countries
6. The Economist
7. Far-Eastern Economic Review
8. The Wall Street Journal
9. The Asian Wall Street Journal
10. The World Wide Web
11. International Business Magazine
Various issues of Euromoney will be very helpful in completing this project.
Due Dates:
·
Two page proposal due by January 21, 2012
o
Proposal should provide reason for choosing this country and identify sources of
your information to analyze this country. By this time, you should have done
library research on your country
·
Midterm report due by February 11, 2012
o
A report that outlines your global analysis, continent analysis, and to some
extent country analysis is needed by this deadline. It should be about 4 pages
·
Final project report due by March 3, 2012.