University of N. Carolina at Wilmington
Cameron School of Business
Fin 439 – Multinational Financial Management
Instructor: Dr. Cetin Ciner
220-E Cameron Hall
Office (Phone): 910-962 7497
Office (Fax): 910-962 7464
E-mail: cinerc@uncw.edu (Preferred form of communication)
Goal: To provide an understanding of principles of international finance to enable
effective financial decision making in a multinational firm.
Course Overview: This course is designed to provide a comprehensive coverage of
multinational finance topics. We will introduce the functions and operations of the
foreign exchange and international money markets and discuss the underlying forces that
move prices in these markets. We will move on to the analysis of the exchange rate risk
problem of the international business firm and provide an in-depth analysis of various
hedging strategies available to the multinational manager. We will also cover
international equity markets and their potential benefit in providing international portfolio
diversification. The discussions will make use of real world events and problems as we
proceed.
Text: Fundamentals of Multinational Finance, Moffett, M., Stonehill, A and Eiteman,
D., Edition III, Pearson, 2009.
Office Hours:
Thursday
8.00- 5.00
Reading: You are encouraged to regularly read the Wall Street Journal and/or the
Financial Times. Other assigned readers will be placed either on reserve in the library or
on the web page. I will ask you to write-up a one-paragraph summary of the assigned
readings and we will discuss the articles in class.
Grading: The following scale will be used to determine the end-of-term grades:
A
A-
92+
90-91
F
Below 60
B+
B
B-
88-89
82-87
80-81
C+
C
C-
78-79
72-77
70-71
D+
D
D-
68-69
62-67
60-61
Graded Materials
Midterm Examination I
Project
Final Examination
Homework and Participation
Total
25 points
25 points
40 points
10 points
100 points
Examinations: All examinations will be closed-note, closed book and will consist of
multiple choice questions. However, you can use a single 3x5 note card that contains only
formula. You must turn in the card with your exam, if you choose to use one.
Project: In your term paper, you will investigate an important topic in international
finance. You will consider different angles and viewpoints of your chosen topic and
provide a thorough analysis. This is group work with three to four students in a group.
Each team will present their analysis in class and also, turn in a paper of eight to ten
pages. Below are some possible topics you may consider, although you are not limited to
these areas. It is important to remember that this research will be your own independent
work. If you use quotes from a source, you should always clearly acknowledge.
Some potential topics:
-
Global financial crises (EMS 1992, Mexico 1994, Asia 1997-1998, Turkey 2001,
US 2007-2008, among others)
International exchange rate regimes and currency board experiments
Role of gold and silver in global finance
International equity markets and potential portfolio diversification benefits
Emerging markets finance
The role of the single currency, Euro
Economic and political dynamics in the European Union
Home bias in international investments
Uncovered interest rate parity and speculation in currency markets
Cross-listing trends across global equity markets
Additional Points:
Integrity: Full compliance with the University rules and regulations on academic
integrity and honesty is expected. The Academic Honor Code can be found in the UNCW
Student Handbook and Code of Student Life.
Academic Honesty: As a student at UNCW, you are pledged to uphold and support the
UNCW Student Academic Honor Code:
The University of North Carolina Wilmington is a community of high academic
standards where academic integrity is valued. UNCW students are committed to honesty
and truthfulness in academic inquiry and in the pursuit of knowledge. This commitment
begins when new students matriculate at UNCW, continues as they create work of the
highest quality while part of the university community, and endures as a core value
throughout their lives.
Guidelines in support of the Honor Code, including definitions of cheating and
plagiarism, may be found at:
http://www.uncw.edu/policies/documents/03_100FINALHONORCODE_Aug2009.pdf
Disabilities: Appropriate academic support is available for any student with a
documented disability. Please notify me and/or contact the Office of Disability Services
(3746) for further information.
Calculator: A financial calculator, and the ability to use it, is required for this course.
The BA II+ is recommended and should be brought to class every day. Time Value of
Money exercises, including a list explaining BA II+ keys, are available online.
Syllabus
1/6
Introduction
1/11
The Balance of Payments
-
Concepts and terminology
Surpluses and deficits
Balance of Payments Identity
What causes deficits and surpluses
1/13
Cont’d
1/18
No Class
1/20
The Foreign Exchange Market
-
Organization of the currency market
F/X quotes and prices
Cross-rates and triangular arbitrage
Calculating changes in exchange rates
1/25
Cont’d
1/27
International Monetary Systems
-
5
3
Alternative exchange rate regimes
Flexible and fixed exchange rates
Advantages and disadvantages
Currency boards and dollarization
The Euro and the EMS
2/1
Cont’d
2/3
International Parity Conditions
-
4
Covered interest rate parity
Determination of forward exchange rate
Speculation in currency markets and “carry trade”
Unbiasedness hypothesis
Purchasing power parity and real exchange rates
The Big Mac standard
Tests of the purchasing power parity
The Fisher hypothesis and real rate of return
6
2/8
Cont’d
2/10
Cont’d
2/15
Exchange Rate Determination and Forecasting
-
Fundamental exchange rate forecasting
Asset market approach
Technical analysis
Market efficiency and predictability of exchange rates
2/17
Cont’d
2/22
Review for Exam I
2/24
No Class
3/1
Midterm Examination
3/3
Foreign Currency Derivatives
-
No Class
3/10
No Class
3/15
Cont’d
3/17
Transaction Exposure
3/122
8
The Basics of futures and option contracts
Terminology and trading
Forwards vs. futures
Speculation with futures and options
Valuation of currency options
3/8
-
7
Hedging with forward contracts
Money market hedges
Hedging using currency options
Cont’d
9
3/24
No Class- Business Week
3/29
Operating Exposure
-
Real exchange risk and the domestic and foreign firms
Pricing to market strategies
Strategies for managing real exchange risk
3/31
Cont’d
4/5
International Portfolio Theory and Diversification
-
10
16
Organization and operation of stock markets
Emerging stock markets
International cross-listing and depository receipts
Advantages and disadvantages of cross-listing
Cont’d
4/7
4/12
-
Risk and return of international investments
The benefits of international diversification
Integrated vs. segmented markets
Home bias in international investments
Country vs. industry factors in international equity markets
Interest Rate and Currency Swaps
Currency versus interest rate swaps
Mechanics of foreign currency swaps
The rationale for currency swaps
The nature of interest rate swaps
4/14
Cont’d
4/19
Term Paper Presentations
4/21
Term Paper Presentations
4/24
Review for Final Examination
15