SFB12614 International Finance (Spring 2019)

The course is connected to the following study programs

Compulsory for students on the Business Administration Programme, specializing in International Business or Economic Analysis.

Optional for for students on the Business Administration Programme, specializing in Project Management and Corporate Consultancy.

Optional for other students on the Business Administration Programme.

Absolute requirements

Microeconomics, Macroeconomics or equivalent.

Lecture Semester

6th semester (spring).

The student's learning outcomes after completing the course

This subject will enable the student to achieve the following learning outcomes.

Knowledge
The student will have gained knowledge of the functioning of the system of international finance both from the perspective of the international macro economy and from the perspective of a firm operating in international markets. This includes a wide spectrum of concepts, such as the idealized concept of 'purchasing power parity', the benefits and costs of hedging and speculating with derivatives and the effects portfolio diversification. The student will have gained an understanding that risk cannot be eliminated - it can only be re-distributed to others.

Skills
The student will have learned to analyze and interpret key markets, institutions, processes and instruments of the global financial economy. This includes theoretical concepts, based on mathematical models, graphical representation and text- and data analysis. In particular the student will have learned to evaluate the benefits, costs and risks of globalization.

General competence
The student will have built a frame of reference for understanding and evaluating the functioning of the global financial markets, its opportunities, challenges and risks. The student will be ready to use the above mentioned methods of analysis to arrive at answers to specific questions under the uncertainties presented by global financial conditions - be it in the pursuit of more advanced academic degrees, or be it in the student's future role as economist, entrepreneur, administrator, policy-maker or educator.

Content

This course is built around three central questions: 'How does the system of international finance function?' ' What are the specific instruments that, for better or for worse, are used by the participants in international financial markets for the purpose of hedging against risk, and for the purpose of embracing risk through speculation?', and 'How could things go so wrong to produce a financial crisis that has led to world recession?'

Topics are:

• The "Great Financial Crisis" and the Myth of the Rational Market
• Foreign Exchange Markets
• Derivatives
• Hedging
• Speculation
• Interest Rate Exposure: Interest Rate and Currency Swaps
• Exchange Rate Determination
• Adverse Selection
• Moral Hazard
• Selected Topics in International Finance

Forms of teaching and learning

Students will participate in the following learning activities:

Lectures; seminars; group work to solve analytical tasks and practice team approach to problem solving; discussion groups on theoretical modeling; discussion groups on data analysis; one-on-one coaching.

Workload

The course will give the student approximately 280 hours of work.

Coursework requirements - conditions for taking the exam

Three analytical group written assignments will be assessed on a pass/fail basis.

A pass on all assignments is necessary to obtain permission to take the final exam.

Examination

Four hours written examination
Aids allowed: approved calculator, mother tongue - English - mother tongue dictionary.

Grades: A - F.

The students have the right to complain on the grades given on the written examination.

Examiners

One internal and one external examiner, or to internal examiners.

Course evaluation

To improve the course, we need the evaluations from the students. The course is evaluated by the students and the evaluations from the students are treated by the staff and the faculty's committee for quality of education.

Literature

The readinglist was last updated 10 October. Changes can be made before semester start.

Mandatory literature 
Textbook: Eiteman, David K., Arthur I. Stonehill, and Michael H. Moffett, Multinational Business Finance, 14th ed. (Global Edition), Boston (available at the bookstore at HIOF, Halden Campus)

Handouts and Multimedia: There will be additional texts and videos (multimedia) available on Canvas. These texts and videos are part of mandatory literature, and they are exam relevant.

Additional reading

• Ariana Anderson, Dollarization: A Case Study of Ecuador, Journal of Economics and Development Studies, June 2016, Vol. 4, No. 2, pp. 56-60

• Norges Bank, Exchange Rate Regimes in Norway between1816-2016 (2016),

https://www.norges-bank.no/en/Published/Papers/Staff-Memo/2016/Staff-Memo-152016/

• Moffet, Michael H., Arthur I. Stonehill, and David K. Eiteman (2014), Fundamentals of Multinational Finance, Pearson International Edition, Prentice Hall.

• Arnold, Glen (2012). Financial Times guide to the Financial Markets. 1st edition. Publisher: FT Press

• Madura, Jeff (2014). International Financial Management. 12th edition. Publisher: Cengage Learning.

• Madura, Jeff (2014). Financial Markets and Institutions. 11th edition. Publisher: Cengage Learning.

• James, Jessica; Marsh, Ian; Sarno, Lucio (eds.) (2012). Handbook of Exchange Rates. 1st edition. Publisher: Wiley.

• Hull, John (2015). Risk Management and Financial Institutions. 4th edition. Publisher: Wiley.

• Guillén, Mauro F. (2015). The Architecture of Collapse: The Global System in the 21st Century. Publisher: Oxford University Press.

• Kedar-Levy, Haim (2016). A Critical History of Financial Crises: Why Would Politicians and Regulators Spoil Financial Giants? Publisher: World Scientific.

• Moosa, Imad A., and Bhatti, Razzaque H. (2009). The Theory and Empirics of Exchange Rates. Publisher: World Scientific.

• Li, Ruogu (2016). Reform of the International Monetary System and Internationalization of the Renminbi. Publisher: World Scientific.

• Xingyun, Peng (2015). Financial Theory: Perspectives from China. Publisher: World Scientific.

• Barth, James R., and Kaufman, George G. (eds) (2015). The First Great Financial Crisis of the 21st Century. A Retrospective. Publisher: World Scientific.

• Haiquing Deng and Xi Chen (2016). Reforging the Central Bank. The Top-Level Design of the Chinese Financial System in the New Normal. Publisher: World Scientific.