GRA 6552 International Finance

GRA 6552 International Finance

Course code: 
GRA 6552
Course coordinator: 
Federico Gavazzoni
Course name in Norwegian: 
International Finance
Product category: 
MSc in Finance
2023 Autumn
Active status: 
Level of study: 
Teaching language: 
Course type: 
One semester

The overall goal of the course it to provide the participants with a sound understanding of foreign exchange markets and their role for the economy. The course is relevant for decision making by investors in the international arena, policymakers and multinational firms.

Investors and firms are increasingly becoming exposed to the international economy. This creates both opportunities and challenges for firms, investors and policymakers. A sound understanding of international markets is needed to deal with these opportunities and challenges. With increased globalization, markets have become more important and more complex. No models are able to capture this complexity. Multinational corporations that operate in this complex environment, need to critically assess different models and show their limitations with empirical tests. Similarly, policymakers and investors need to understand the environment where they operate. 

In the first part of the course, the students learn about the history and organization of international financial markets, with special emphasis on the foreign exchange market. In the second part, students learn different models for exchange rate determination, with special emphasis on macroeconomic determinants of exchange rates. The third part of the course will give students knowledge on issues in corporate finance, like capital budgeting, in an international setting. 

The second half of the course focuses more on the currency risk premia in order to understand exchange rates. First, students will learn about the market microstructure approach to exchange rates. Then, the course will go through different investment strategies involving exchange rates, and students will learn how to understand exchange rates through the lens of modern asset pricing. An important goal of the course will be to shed light on the long-term sustainability of fiscal and monetary policies in open economies, and of solutions to business problems faced by multinational corporations.

Learning outcomes - Knowledge
  • Understand predictions and shortcomings of economic models in an international environment.
  • Ability to apply results from academic research to real-life problems in international finance.
  • Study of topics in different fields as asset pricing, market microstructure and corporate finance, all applied to an international setting.
Learning outcomes - Skills
  • Master advanced digital computational tools: programming softwares to implement quantitative strategies, and data analysis softwares to test and interpret models.
General Competence
  • Develop the ability to identify, structure and implement sustainable business models and solutions for multinational corporations.
Course content
  1. Background: international monetary system.
  2. Foreign exchange markets. International trade and capital flows. International markets for short-term debt instruments.
  3. Parity relations: Covered and Uncovered Interest rate Parity, Purchasing Power Parity, International Fisher effect.
  4. Testing parity conditions.
  5. Currency risk premia: sources and variation.
  6. Carry trading and currency momentum. Creating and evaluating international investment strategies.
  7. International capital budgeting. Capital structure and cost of capital.
  8. ESG in currency investing
  9. Exchange rate determination.
  10. Foreign exchange microstructure: dealer behavior, liquidity and price formation.
  11. Exchange rates, macro, financial intermediation and order flow. Explaining exchange rate movements.

During the course, the students will acquire the following skills:

  • Understand why FX-rates fluctuate.
  • Produce and evaluate FX-rate forecasts.
  • Calculating the value of multinational companies.
  • Understand the importance of heterogeneity of market participants for determination of exchange rates.
  • Create and evaluate investment strategies involving exchange rates.
  • Be able to evaluate different sources of variation in currency risk premia and the implications for the macroeconomy.
Teaching and learning activities

Lectures will provide students with in-depth explanations of the main economic models in international finance. Interactive class discussions will stimulate students to reflect about the shortcomings of these models, as well as to suggest potential ways forward to improve them. Class participation is therefore essential to internalize the complexity of these models and understand their empirical applications.

The contribution to the learning process of the assignment is twofold. First, it requires students to learn how to implement and test the models with advanced digital tools as programming and data analysis softwares. This helps students understand how to concretely apply the models, design and implement quantitative trading strategies on exchange rates, interpret empirical results and compare the latter with models' predictions. Second, students are required to solve a business case-study in an international environment. This will drive students towards learning how to structure a real business problem, tackle it appropriately and find sustainable long-term solutions to complex issues that multinational corporations have to face. The learning path thus proceeds along two parallel avenues. On the one hand, implementing quantitative strategies and testing theoretical models acquiring expertise with advanced digital tools. On the other hand, train themselves to develop sustainable business models, since the long-term sustainability of the viable solutions proposed to solve concrete complex problems arising in an international economy is key.

The booklet of the course prepared for the students will be complemented by class discussions of the most recent and influential academic papers in the field. The goals of the in-class discussions of papers will be to give to students in-depth knowledge about the recent advancements in research, and to stimulate their intellectual curiosity and ability to go further with respect to existing theories, identifying their weaknesses and proposing and evaluating alternative solutions.

Students will implement exchange rate models in Excel and R. 

Software tools
Software defined under the section "Teaching and learning activities".
Additional information

The exam for this course has been changed starting academic year 2023/2024. The course now has two exam codes instead of one. It is not possible to retake the old version of the exam. Please note new exam codes in the Exam section of the course description. 

It is the student’s own responsibility to obtain any information provided in class.

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.


Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.

Required prerequisite knowledge

Students are expected to have a basic knowledge of Excel and R (or similar programming language).

Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
Exam category:
Form of assessment:
Written submission
Exam code:
GRA 65526
Grading scale:
Grading rules:
Internal examiner
Examination when next scheduled course
40No 1 Semester(s)Group ( 3 - 5)Group project
Exam category:
Form of assessment:
Written submission
Exam code:
GRA 65527
Grading scale:
Grading rules:
Internal examiner
Examination when next scheduled course
60Yes 3 Hour(s)
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Individual Final written examination under supervision
Exam category:Submission
Form of assessment:Written submission
Grouping (size):Group (3-5)
Support materials:
Duration: 1 Semester(s)
Comment:Group project
Exam code:GRA 65526
Grading scale:ECTS
Resit:Examination when next scheduled course
Exam category:Submission
Form of assessment:Written submission
Grouping (size):Individual
Support materials:
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Duration: 3 Hour(s)
Comment: Final written examination under supervision
Exam code:GRA 65527
Grading scale:ECTS
Resit:Examination when next scheduled course
Type of Assessment: 
Ordinary examination
All exams must be passed to get a grade in this course.
Total weight: 
Sum workload: 

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.