Fin 4328 – Moore
Syllabus – Summer II - 2006
Finance 4328 Syllabus
Summer II - 2006
Module Topic
Dr. Mark E. Moore
Department of Finance
Texas Tech University
- International Financial Management
906 Rawls School of Business (742-3185)
Email:
mark.moore@ttu.edu
Web Page: mmoore.ba.ttu.edu
Course Meeting Times:
Section 1
Mon – Fri
8:00 – 9:50
BA 268
Office Hours: Monday, Wednesday and Friday
3:00 – 4:00; and by appointment
Introduction
Welcome to FIN 4328! Financial management in an international context
differs significantly from the domestic situation. This course focuses on
multinational corporations which make investment, financing and
operating decisions in an international setting. This unit involves the
analysis of international financial and currency markets and monetary
system in which domestic and multinational firms operate. In addition, this
unit analyses the risks and opportunities faced by a corporation as a result
of operating in an international environment
Unit objectives
The purpose of this unit is to introduce you to financial management from
the perspective of a multinational corporation. In response to globalization
as well as advances in communications, many firms, both small and large,
now operate in two or more countries. This situation exposes such firms to
diversifiable exposures such as exchange rate risk and non-diversifiable
exposures such as political risk. We will discuss the exposures that confront
multinational firms, how such exposures impact business strategy and
operations, and how they can be mitigated. Students should expect to
develop an integrated analytical and decision making perspective that will
enable them to extend financial concepts such as capital budgeting and risk
management, and instruments such as financial forwards, futures, options
and arbitrage to their international analogs.
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Fin 4328 – Moore
Syllabus – Summer II - 2006
Broad learning outcomes
On completion of this course, you should be able to answer the following
questions:
On completion of this course, you should be able to answer the following
questions and/or have the following skills:
1. Be able to evaluate the major risks and potential rewards faced by a company in the
international marketplace.
2. Be able to discuss international markets and the way they function.
3. Understand the major instruments in the international markets, why they exist, and who
uses them.
4. Be familiar with risk management techniques.
5. Understand the major theoretical explanations of exchange rate determination and put
them to practical use.
6. Be familiar with sources of data in international finance.
7. Be able to use financial, economic, and regulatory data to make predictions regarding the
long and short term prospects for a country's currency.
8. Be able to appropriately use forwards, futures, and options contracts to hedge an
international security or currency position, or to use these contracts to profit from
expected moves in the currency or security. You should also be aware of the availability
of these contracts on various international exchanges.
9. Understand and be able to discuss the logic behind the Black-Scholes Options Pricing
Model. Know the model's utility and limits, and be able to use it to price European-style
options on both securities and currencies.
10. Be able to discuss access to and uses of different exchanges.
11. Have a working knowledge of euro-currencies and the role and activities of euro-banks.
12. Be able to analyze the capital structure of an international firm.
13. Be able to isolate relevant variables in and perform cost of capital and capital budgeting
calculations for an international firm.
14. Identify the determinants of currency prices and explain how these prices change
in the foreign exchange (FX) markets;
15. Explain international parity conditions which link the prices of goods, interest rates,
spot rates and forward rates throughout the world;
16. Given a firm’s nature of business and operating environment, evaluate the level of
exchange rate exposure that firm may have;
17. Explain various strategies a firm may use to manage exchange rate exposure.
Textbook:

Foundations of Multinational Financial Management (Shapiro; 5th Edition 2005)
Prerequisite Courses (Must be completed and are strictly enforced):
 Finance 3320 and 3323
(Corporate Finance and Money, Banking & Credit)
 Econ 2301 and 2302 (Principles of Macro and Micro Economics)
 Accounting 2301 and 2302
(Principles of Financial and Managerial Accy)
 Math 2345 (Statistical Methods for Business Majors)
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Fin 4328 – Moore
Syllabus – Summer II - 2006
Grade Determination and Components:
Collected Assignments: There will be unannounced quizzes, in-class assignments
(workshops), and collected homework throughout the term. Each assignment
collected will have equal weighting toward your grade determination. The lowest
score will be dropped. No late assignments or make-up work will be accepted.
Currency Trading Project: This is an individual assignment. Each student will be
endowed with $100,000 on an OANDA trading account. You will trade a minimum
of three currencies and execute at least 50 round-trip currency transactions. You
will assume the role of a professional currency trader. This involves economic
research, awareness of relevant economic disclosures, documenting reasons for
trades, analysis of execution of completed trades, and keeping a trade log showing
positions and profit (loss) by currency. Grading criteria will be distributed in class.
Weekly Exams: Each Monday, there will be an exam covering the previous week’s
material. As indicated in the course timetable, you will have the opportunity to take
four (4) such exams. All four of these exams will be used in the determination of
your final course grade. Late exams or make-up exams will neither be offered nor
accepted. Exams will take place at the beginning of class period; followed by new
lecture material for the remainder of the class time. Funerals, Deaths or Illness must
be documented. Exams will take place at the beginning of class period.
Group Multinational Firm Analysis Project: The group Multinational Firm
Analysis project is a practical application that integrates all aspects of material that
will be presented in this course.
The purpose of the project is to prepare a
comprehensive analyst’s report that assesses and analyzes the international aspects,
disclosure, risks (political, currency, interest rate, production, asset exposure, etc),
and risk management of a selected multinational firm. Examples of such reports will
be presented in the class throughout the semester. Completion of the project will
provide you the opportunity to partake in a “real-world” analyst activity. Also, the
finished report has proven to be a beneficial job search and interview tool. Interim
reports will be collected that represent logical sections of the project. These serve
as rough drafts of your final project and will receive written comment.
Group Oral Presentations: In place of a final examination, each group (team)
will make an oral presentation of their findings in the form of an analyst briefing.
This presentation will be peer and professor reviewed.
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Hourly Exams:
4 @ 12.5%
Collected Assignments:
Currency Trading Project
Interim Drafts for Projects (2@2.5%)
Group Project/Report - Oral Presentation:
Final Draft - Group Project/Report:
Course Total
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Percent Course Total
50%
10%
10%
5%
5%
20%
--------------100%
Fin 4328 – Moore
Syllabus – Summer II - 2006
Final Course Grade Policy:
100 – 98
97 – 93
92 – 90
A+
A
A-
89 – 88 B+
87 – 82 B
81 – 80 B-
79 – 78 C+
77 – 72 C
71 – 70 C-
69 – 68 D+
67 – 62 D
61 – 60 D-
Timetable (Subject to Modification)
Date
Thu–Jul 6
1
Fri.–Jul 7
2
Material Covered
Chapter 1
Chapter 7
Chapter 7
Mon–Jul 10
Tue–Jul 11
Wed–Jul 12
Thu–Jul 13
Fri.–Jul 14
3
4
5
6
7
Chapter
Chapter
Chapter
Chapter
Chapter
Mon–Jul 17
8
2
2
3
4
4
Topic and Assignments
Course Intro. Overview of Multinationals
Foreign Exchange Market and Quotes
Foreign Exchange Market and Quotes
Currency Markets and Exchange Rates
The Determinations of Exchange Rates
The Determination of Exchange Rates
The International Monetary System
Parity Conditions in International Finance
Parity Conditions in International Finance
Foreign Exchange Derivatives
Tue–Jul 18
Wed–Jul 19
Exam1 (Ch1-4, 7)
Chapter 8
9 Chapter 8
10 Supplement
Thu–Jul 20
Fri–Jul 21
11 Chapter 8
12 Chapter 8
Mon–Jul 24
Tue–Jul 25
13 Exam2
Chapter 6
14 Chapter 10
Wed–Jul 26
15 Chapter 10
Thu–Jul 27
Fri–Jul 28
16 Chapter 11
17 Chapter 11
Mon–Jul 31
Tue–Aug 1
Wed–Aug 2
Thu–Aug 3
Fri.–Aug 4
18 Exam3 (Ch 6,10,11
Chapter 9
19 Chapter 9
20 Chapter 14
21 Chapter 17
22 Chapter 17
Swaps and Interest Rate Derivatives
Estimating Interest Rate Volatility and Risk
International Cost of Capital
Capital Budgeting for Multinationals
Capital Budgeting for Multinationals
Mon–Aug 7
23 Exam4 (Ch 9,14,17
Project Presentations
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Foreign Currency Futures
Foreign Currency Futures
Options Primer
Foreign Currency Options
Foreign Currency Options
Risk Management
Country Risk Analysis and Assessment
Measuring/Managing
Translation
and
Transaction Exposure
Measuring/Managing
Translation
and
Transaction Exposure
Measuring/Managing Economic Exposure
Measuring/Managing Economic Exposure
Capital Budgeting
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Fin 4328 – Moore
Syllabus – Summer II - 2006
Important Dates:
Thursday
Friday
July 6
July 7
-
Tuesday
July 11
-
Formation of Project 1 Groups Due
Monday
Friday
July 17
July 21
-
Exam 1; Currency Trade Books Due
Interim Draft 1 for Group Project Due
Monday
July 24
Wednesday July 26
-
Exam 2; Currency Trade Books Due
Last Day to Drop Course
Monday
Friday
July 31
Aug 4
-
Exam 3; Currency Trade Books Due
Submit Group Report
Monday
Aug 7
-
Final Exam Period - 11:00 – 1:30 PM
Exam 4 and Submit Individual Currency Trading Reports
Students with Disabilities and those Requiring Special Assistance
First and foremost, under Section 504 of the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990, "No otherwise qualified person with a disability
in the United States . . .shall, solely by reason of . . .disability, be denied the benefits
of, be excluded from participation in, or be subjected to discrimination under any
program or activity receiving federal financial assistance." I/We certainly have a legal
and moral responsibility to accommodate our disabled students. But I/we do not, and
should not, have to treat disabled students in a manner that places them at a
competitive advantage or disadvantage with their classmates. Any student claiming a
disability needs to be referred to AccessTech, which is the University's Disability Support
Program. The Faculty Guide to AccessTech, which includes faculty responsibilities in
dealing with disabled students, is available at
http://www.studentaffairs.ttu.edu/accesstech/publications/faculty_check_list.pdf.
Student Disabilities Policy:
Any student who, because of a disabling condition, may require special arrangements in
order to meet course requirements should contact the instructor as soon as possible.
Students should present the appropriate documentation from AccessTech verifying their
disability, and outlining the special arrangements required. No accommodations will be
provided disabled students prior to completion of this approved University process.
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