McGill University
Faculty of Management
International Finance I
BCom FINE 482-001. Winter 2003
Section 001 – Monday-Wednesday 16:05-17:25 – BRONF: 599
________________________________________________________________________
Prof. Stefano Mazzotta
Office: BRONF: 551B; Phone: 398-4000 ext 00856;
E-mail smazzo@po-box.mcgill.ca
Office Hours: Monday, 2:30-16:00, or by appointment
Administrative Assistant: Che Doran, 514-398-4000 Ext. 09264
________________________________________________________________________
Course Description
International finance is the discipline that studies cross-country, cross-currency
money management, and the structure and processes of institutions that use global
capital. The objective of this course is to give a comprehensive introduction to the
foundations of global finance including but not limited to spot and forward exchange
markets, future markets, options, swaps, international monetary system, and currency risk
management.
The student will learn how firms and individuals make decisions in a global
environment and manage their capital flows. The ultimate goal is that the student
becomes able to recommend ways to make this system more efficient. In addition, the
student should be able to evaluate and know how to control the risks embedded in the
international markets.
Learning Objectives
The first area of learning is related to the environment. International refers to the
fact the economies and markets that we consider are thought of as nations that interact in
the international markets.
There are also two different approaches to the discipline we follow in this course.
The first, is related to broader concepts that take into consideration the complexity of the
economic relation in international markets and requires that the student make the best
possible use of the material covered in the course along with all her/his previous cultural
background. The second one is very technical in nature. In this second area clear-cut
answers can be given to precise managerial questions.
These two approaches eventually must converge with one another when it is time
to make business decisions related to international finance problems.
The paramount goal of the course is becoming able to formulate
recommendations that are based on sensible evaluation of the risks and return implied by
business decisions and that harmonize the relevant concepts from the two approaches.
Prerequisite for this class are basic finance, calculus classes and computer
proficiency. Good quantitative skills and knowledge of personal computers and major
business application, such as excel software are also important.
Career Focus
To cover the International Finance exhaustively, the Faculty offers three courses. This
one is the necessary first step. The next two steps are International Finance II and Global
Investments. International Finance II covers in detail the problems faced by corporations
in the global environment. If you plan to work instead in the investment area, Global
Investments provides a presentation of international capital markets.
Course Material
Choice of required textbooks:


David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett, Multinational
Business Finance, Ninth edition, Addison Wesley Longman.
Bruno Solnik, International Investments, Fourth edition, Addison Wesley
Longman.
Both texts are available at the McGill Bookstore. The first one (ESM) is the standard
reference for global corporate finance and will be useful for you if you plan to register for
International Finance II. The second one (S) is written by a leading academic figure of
international finance and is the required textbook for Global Investments. It is also on the
recommended reading list for the CFA examination. We will only cover about half of
these two books in this course, so you should base your choice on what you want to
specialize in later.
Course Grade
Class Participation – Short Quiz
Problem Sets and Case Studies
Essay and Presentation
First Midterm
Second Midterm
15%
20%
15%
25%
25%
The even repartition of percentages in the overall grade aims at favoring a continuous
acquisition of the course materials rather than an end of semester race. Peer’s assessment
will also contribute to the final grade.
Class participation grade is based on both your attendance and your constructive
interventions in class.
A series problem set and case studies will be assigned. The work must be done in
predetermined groups of 5. No late assignment will be accepted. Assignments must be
typed.
The choice of the essay or case study is to be chosen by the end of the term. It will be a
group work due at the end of the term and presented in class.
The midterms will be in-class, closed-book exams. They will be partly numerical and
partly non-numerical, asking you to explain concepts and results.
Only written requests (not e-mails) for re-grades carefully explaining the reason may be
accepted. A re-grade might result in a lower grade.
Quality Circle. To insure that the course will be a constructive and enjoyable experience
for all the participants we will use a QC. The purpose of the QC is to acquire continuous
feedback for improving the course. The QC is formed by for three volunteers and
myself. We will meet every other week throughout the term for 20-30 minutes after class.
Integrity. Cheating and plagiarism by any student hurts all students, because anything
that undermines the evaluation process undermines the integrity of our degrees. More
information about how to maintain integrity can be found at
www.mcgill.ca/integrity/students/
Course Outline
Week
Theme
Topics
International Monetary Environment
Readings
1
The Balance of Payments
2
Foreign Exchange Markets
ESM4 or S1 and S12
3
Parity Conditions
ESM3 or S2
4
ESM3 or S3
5
The Determination of
Exchange Rates
First Midterm
6
Financial crises and the Euro
ESM2
Foreign Exchange Exposure
7
Currency Options
ESM5 or S13
8
Currency Risk Management
9
10
Interest Rate Exposure and
Swaps
Review before the midterm
ESM6 and ESM7 or
S14
ESM9 or S11
11
Second Midterm
12
Presentation of Work Group
13
Presentation of Work Group
The slides for the course and other relevant information will be available on WebCT.
Student Profile
FINE 482. Winter 2003
Your picture here
Name ______________________________________________________________
Telephone __________________________________________________________
Email ______________________________________________________________
Previous Finance Courses ______________________________________________
___________________________________________________________________
Educational Background _______________________________________________
Professional Experience _______________________________________________
What is an option? ________________________________________
As a personal investor, do you trade financial assets? _______________________
Professional Objective ________________________________________________
Any special interests or other background info you'd like me to know ___________
___________________________________________________________________