International Corporate Finance)Course Syl labus Instructor:Xin Chen Associate Professor in Finance Accounting Shanghai Jiao Tong University Email:xinch@sjtu.edu.cn Textbook and References:Moffett,Michael H..Stonehill,Arthur I.Eiteman.David K.: Fundamentals of Multinational Finance,Third Edition,Prentice Hall Exam:To be determined. BACKGROUND FOR THE COURSE AND RELATIONS TO OTHER COURSES Companies and investors operate today in a global environment.The competitiveness of firms depends on business conditions in other countries.Financial markets are integrated.The integration implies that the investment opportunities,the cost of financing and the risks depend on the development in international bond markets and stock markets.It follows that it is necessary for corporate managers,investors and their financial advisors to have a good understanding of the functioning of international financial markets. The course supplements the introductory bachelor course in finance by adding international perspectives.The course will also relate to and bring in relevant matters from other related topics such as economics,accounting and business strategy. AIM OF THE COURSE It is the general aim of the course to provide the participants with an introductory knowledge of financial decision making in an international perspective. More specifically,the aim of the course is: to introduce the student to the global financial environment in which companies and investors operate to describe international markets for foreign exchange,derivatives,bonds,shares and other assets to provide the student with tools to make risk analyses in connection with transactions in foreign exchange,export and import,international portfolios and foreign direct investments to explain methods and instruments that can be applied by companies and investors in the management of risks related to international financial markets MAIN TOPICS The global financial environment and the alternative internationalization strategies of corporations;The international monetary system;Trading patterns and practices in the foreign exchange market. Determination and forecast of exchange rates on the basis of the theoretical parity conditions, balance of payments analysis and the asset approach as a means of identifying foreign exchange exposure
《International Corporate Finance》Course Syllabus Instructor: Xin Chen Associate Professor in Finance & Accounting Shanghai Jiao Tong University Email：xinch@sjtu.edu.cn Textbook and References：Moffett, Michael H., Stonehill, Arthur I. & Eiteman, David K.: Fundamentals of Multinational Finance, Third Edition, Prentice Hall Exam: To be determined. BACKGROUND FOR THE COURSE AND RELATIONS TO OTHER COURSES Companies and investors operate today in a global environment. The competitiveness of firms depends on business conditions in other countries. Financial markets are integrated. The integration implies that the investment opportunities, the cost of financing and the risks depend on the development in international bond markets and stock markets. It follows that it is necessary for corporate managers, investors and their financial advisors to have a good understanding of the functioning of international financial markets. The course supplements the introductory bachelor course in finance by adding international perspectives. The course will also relate to and bring in relevant matters from other related topics such as economics, accounting and business strategy. AIM OF THE COURSE It is the general aim of the course to provide the participants with an introductory knowledge of financial decision making in an international perspective. More specifically, the aim of the course is: • to introduce the student to the global financial environment in which companies and investors operate. • to describe international markets for foreign exchange, derivatives, bonds, shares and other assets • to provide the student with tools to make risk analyses in connection with transactions in foreign exchange, export and import, international portfolios and foreign direct investments • to explain methods and instruments that can be applied by companies and investors in the management of risks related to international financial markets MAIN TOPICS • The global financial environment and the alternative internationalization strategies of corporations; The international monetary system; Trading patterns and practices in the foreign exchange market. • Determination and forecast of exchange rates on the basis of the theoretical parity conditions, balance of payments analysis and the asset approach as a means of identifying foreign exchange exposure
Management of a company's foreign exchange exposure.Transactions with foreign trading partners will in many cases be denominated in foreign currencies.It is therefore an integral part of the financial management of a company with international operations to monitor the firm's exposures to fluctuations in foreign exchange rates.A broad range of financial instruments can be used to manage the exposures connected with international transactions. Company financing in a global environment.Estimation of cost of capital and determination of capital structure when funding of the firm takes place in several countries and currencies. Calculation of a company's cost of equity.Costs and benefits of listing abroad.Use of interest rate and currency swaps in management of financial risks. Foreign investment decisions.Capital budgeting and calculation of returns in connection with investment projects abroad.Management of political,economic and financial risks in direct investments. .Analysis of international portfolios.The trade off between risk and return when stock price volatility and exchange rate volatility are combined. LEARNING OUTCOME;QUALIFICATIONS AND COMPETENCES: Knowledge about the fundamental characteristics of international business o Global financial environment o Corporate governance in an international perspective o Foreign exchange rate regimes and markets Determination of expected exchange rates based on different approaches such as: o International parity conditions o Fundamental analysis based on balance of payments variables Evaluation of different foreign exchange risk exposures o Identification,measurement and management Determination of cost of capital o Weighted average cost of capital o Cost of equity o Capital structure o Cost of debt Management of international assets and liabilities o Multinational capital budgeting o International trade finance o Foreign direct investments COURSE AGENDA Week 1 Course introduction Current Global Financial Crisis Video:Dollar Bubble DiMartino and Duca(Economic Letter,Insights from the FRB-Dalls,Nov.2007), The Rise and Fall of Subprime Mortgages Ashcraft and Schuermann(The Investment Professional,Fall 2008,pp.2-11),The Seven Deadly Frictions of Subprime Mortgage Credit Securitization Haubrich et al.(FRB Cleveland Annual Report 2007),Central Banks Crisis
• Management of a company’s foreign exchange exposure. Transactions with foreign trading partners will in many cases be denominated in foreign currencies. It is therefore an integral part of the financial management of a company with international operations to monitor the firm’s exposures to fluctuations in foreign exchange rates. A broad range of financial instruments can be used to manage the exposures connected with international transactions. • Company financing in a global environment. Estimation of cost of capital and determination of capital structure when funding of the firm takes place in several countries and currencies. Calculation of a company’s cost of equity. Costs and benefits of listing abroad. Use of interest rate and currency swaps in management of financial risks. • Foreign investment decisions. Capital budgeting and calculation of returns in connection with investment projects abroad. Management of political, economic and financial risks in direct investments. • Analysis of international portfolios. The trade off between risk and return when stock price volatility and exchange rate volatility are combined. LEARNING OUTCOME; QUALIFICATIONS AND COMPETENCES: • Knowledge about the fundamental characteristics of international business o Global financial environment o Corporate governance in an international perspective o Foreign exchange rate regimes and markets • Determination of expected exchange rates based on different approaches such as: o International parity conditions o Fundamental analysis based on balance of payments variables • Evaluation of different foreign exchange risk exposures o Identification, measurement and management • Determination of cost of capital o Weighted average cost of capital o Cost of equity o Capital structure o Cost of debt • Management of international assets and liabilities o Multinational capital budgeting o International trade finance o Foreign direct investments COURSE AGENDA Week 1 Course introduction & Current Global Financial Crisis Video: Dollar Bubble DiMartino and Duca (Economic Letter, Insights from the FRB-Dalls, Nov. 2007), The Rise and Fall of Subprime Mortgages Ashcraft and Schuermann (The Investment Professional, Fall 2008, pp. 2-11), The Seven Deadly Frictions of Subprime Mortgage Credit Securitization Haubrich et al.(FRB Cleveland Annual Report 2007), “Central Banks & Crisis
Management" Week 2 Financial Goals and Corporate Governance Week 3 The international monetary system Yuan mini-case Problems 1.2.8-10.MSE 3 Week 4 The balance of payments Problems 5-8,29 MSE 4 Week 5 The foreign exchange market Problems1,6,7,14,15 MSE 5 Week 6 International parity conditions Problems6,9,11,12,18 MSE6 Week 7 Foreign exchange rate determination and forecasting Problems 10-14 MSE7 Week 8 Foreign currency derivatives Problems 1,3,5-7 MSE8 Week 9 Transaction exposure Problem 17 MSE 9 Week 10 The global cost and availability of capital Problems 8-10 MSE 12 Week 11 Sourcing equity globally;Financial structure and international debt Problems 1 and 5 in chapter 14 MSE13,14 Week 12 Interest rate and currency swaps Problems 4.9 MSE 15 Week 13 International portfolio theory and diversification Problems 1,3,4,11,12 MSE 16 Week 14 Political risk assessment and management TBA MSE 18 Week 15 Multinational capital budgeting Problems 3,4. MSE 19 Week 16 Cross-Border Mergers,Acquisitions,and Valuation Week 17 Review
Management” Week 2 Financial Goals and Corporate Governance Week 3 The international monetary system Yuan mini-case Problems 1,2,8-10, MSE 3 Week 4 The balance of payments Problems 5-8,29 MSE 4 Week 5 The foreign exchange market Problems1,6,7,14,15 MSE 5 Week 6 International parity conditions Problems 6,9,11,12,18 MSE 6 Week 7 Foreign exchange rate determination and forecasting Problems 10-14 MSE 7 Week 8 Foreign currency derivatives Problems 1,3,5-7 MSE 8 Week 9 Transaction exposure Problem 17 MSE 9 Week 10 The global cost and availability of capital Problems 8-10 MSE 12 Week 11 Sourcing equity globally; Financial structure and international debt Problems 1 and 5 in chapter 14 MSE13, 14 Week 12 Interest rate and currency swaps Problems 4, 9 MSE 15 Week 13 International portfolio theory and diversification Problems 1, 3, 4, 11, 12 MSE 16 Week 14 Political risk assessment and management TBA MSE 18 Week 15 Multinational capital budgeting Problems 3, 4, MSE 19 Week 16 Cross-Border Mergers, Acquisitions, and Valuation Week 17 Review