GRA 6544 Financial Strategy in a Global Economy
GRA 6544 Financial Strategy in a Global Economy
The overall goal of the course it to provide the participants with a sound understanding of financial decision-making in the multinational firm. However, whilst the course is presented from a managerial perspective and thus applied in nature, decision-making is approached using firmly established theories in economics and finance.
The course can be broadly split into three parts. The first part of the course examines international financial markets and the determination of exchange rates. In the second part, we will consider the impact of exchange rates on the cash flows of firms. In particular, we will learn how to measure and manage (hedge) how different cash flows are exposed to unexpected changes in exchange rates. The third part of the course focuses on some traditional issues in corporate finance such as capital budgeting, cost of capital, and investments in physical assets.
During the acquisition of the above-mentioned knowledge, the students will acquire the following skills:
- Understand why FX-rates fluctuate and which risks these fluctuations impose on multinational corporations.
- Produce and evaluate FX-rate forecasts and measure FX-rate risk and political risk.
- Identify and quantify a company's exposure to exchange rate risk and political risk.
- Implement risk management strategies and understand how they create value.
- Valuation of different derivatives that are linked to the FX market.
- Calculating the value of multinational companies, their investment opportunities, and hedging strategies.
Multinational corporations operate in a complex environment and the course provides a series of models to understand this environment and tools to cope with it. However, no model will be able to fully capture this complexity and we will devote time to critically assess them and show their limitations with empirical tests. Thus, an important learning outcome of this course is to understand the shortcomings of the models because this should itself enter the corporation's decision-making process.
- Introduction: Globalization and the Multinational Firm
- The International Monetary System: Balance of payments and supply and demand in the FX-market, FX-rate regimes
- Foreign Exchange Market: Market participants, contracts traded, FX-rate quotation, interbank market, market microstructure
- Parity Relationships: covered and uncovered interest parity, purchasing power parity, international Fisher effect
- Forecasting Exchange Rates: forecasting FX-rate level and variance, forecast performance measures, forecasts based on economic models and technical analysis, carry trades
- Currency Futures and Options: pricing and hedging
- Transaction (contractual) Exposure: financial hedging, special hedging problems, alternative hedging approaches
- Operating Exposure: measuring this exposure, financial and operational hedging
- Foreign Direct Investment, Political and Country Risks: determinants of country risk, measurement, and consequences for capital budgeting
- Domestic and International Capital Structure and the Cost of Capital
- Domestic and International Capital Budgeting
The course is delivered as a mixture of lectures, and cases and problems discussions illustrating the practical application of the concepts and tools covered in the lectures.
Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class.
This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course starts.
At resit, all exam components must, as a main rule, be retaken during next scheduled course.
Honour Code
Academic honesty and trust are important to all of us as individuals, and represent values that are encouraged and promoted by the honour code system. This is a most significant university tradition. Students are responsible for familiarizing themselves with the ideals of the honour code system, to which the faculty are also deeply committed.
Any violation of the honour code will be dealt with in accordance with BI’s procedures for cheating. These issues are a serious matter to everyone associated with the programs at BI and are at the heart of the honour code and academic integrity. If you have any questions about your responsibilities under the honour code, please ask.
All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.
Covid-19
Due to the Covid-19 pandemic, there may be deviations in teaching and learning activities as well as exams, compared with what is described in this course description.
| Assessments |
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Exam category: Submission Form of assessment: Written submission Weight: 10 Grouping: Group (4 - 5) Duration: 1 Semester(s) Comment: Several homework assignments to deepen the understanding of the course content. Exam code: GRA65441 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Weight: 20 Grouping: Group (4 - 5) Duration: 1 Semester(s) Comment: Case work that applies the theories and methods learned in the course in practical situations. Exam code: GRA65441 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 70 Grouping: Individual Support materials:
Duration: 3 Hour(s) Comment: Final written examination under supervision. Exam code: GRA65441 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.