Massey University
School of Economics and Finance
125.780
Advanced International Finance
(30 credits)
Administration Guide
Viet Nam, 2012
Dr Christopher B. Malone
School of Economics and Finance (PN & Wellington)
Massey University
1
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University under licence. You may not sell, alter or further reproduce or distribute any part of this course
pack/material to any other person. Where provided to you in electronic format, you may only print from it for
your own private study and research. Failure to comply with the terms of this warning may expose you to legal
action for copyright infringement and/or disciplinary action by the University.
2
Contents
Welcome and Course Description ................................................................................. 4
Paper Coordinator.......................................................................................................... 5
Formal Description......................................................................................................... 6
Course Outline ............................................................................................................... 7
Block courses ................................................................................................................. 8
Learning Structure ....................................................................................................... 12
Readings and Resources .............................................................................................. 13
Assessment Overview .................................................................................................. 14
Assessments: ................................................................................................................ 15
Class Presentations: ..................................................................................................... 15
Assignments ................................................................. Error! Bookmark not defined.
APPENDICES ................................................................................................................. 18
Appendix 1 - Plagiarism................................................................................................ 18
Appendix 2 - References .............................................................................................. 19
Appendix 3 - Presentation of written work ................................................................. 22
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Welcome and Course Description
As course coordinator for 125.780 Advanced International Finance I’d like to warmly
welcome you to this inaugural class for the Viet Nam group.
A general overview of the course is that it covers international financial markets and
how and why corporations conduct financial transactions in these markets. The main
focus is on how the processes can be managed. The first part of the course will
examine issues related to the international markets, including foreign exchange
markets and currency derivative markets. It will also consider corporate financial
management in an international setting, including the implications of legal systems,
corporate governance systems, political risk, and exchange rate mechanisms. The
next part of the course will consider financial issues associated with the operation of
the firm. This part will focus on the identification, measurement, and management
of the impact of exchange rates on the firm; project evaluation; financial structure,
and the firms' cost of capital and financing decision making in a global market.
While the course discusses theoretical basis on the various issues, it also relies on
both empirical evidence and discussion of firms' real world activities.
The course has a combination lecture and seminar style. It evaluates students
through presentations, a test and an exam.
This paper is web-based so it makes use of the internet to help create an “online
learning environment”.
We have permission to use chapter material from Thomas O’Brien’s text
International Financial Economics: Corporate Decisions In Global Markets.
Please note that University expects you to put in an average of 25 hours per week into
this course. Obviously you do a little more in exam week, the block week, and the
assignment weeks, and so on, but you can have a few quieter weeks as well.
I am sure we can successfully work together to ensure that your studies in this topic
will be valuable for you.
Best wishes for a successful class.
Kind regards,
Chris Malone
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Paper Coordinator
Here’s a little background on me. I started out as an accountant and moved into the
academic side of that field. I then gravitated to the finance side and earned a
masters degree and a PhD (Finance, University of Connecticut). I have taught a range
of finance, accounting and economics classes in New Zealand and the United States.
My research interests lie in the field of Corporate Finance, Accounting and
Investments. I have both a theoretical and applied teaching approach and I enjoy
seeing students rise and succeed at the challenge of learning and getting careers. I’m
married, with three children.
If you have any comments or questions please contact me.
Refectory Building 3.15
Email: c.b.malone@massey.ac.nz
: (06) 350 5799 x 2334
Postal address:
Chris Malone
School of Economics and Finance
Massey University
Private Bag 11 222
Palmerston North
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Formal Description
PRESCRIPTION
This paper provides an understanding of the theory, institutions and
environment of international finance, investment and management.
Students will gain an insight into how exchange rates and their
movements affect business organisations and can be managed. The role
of conventional financial theory in an international environment will also
be considered.
LEARNING OUTCOMES
On successful completion of this paper students should be able to:
1. Explain the roles played by the major market participants in international
financial markets.
2. Analyse the types of derivative instruments traded on foreign exchange
markets.
3. Derive the international parity conditions and relate these to macro-economic
theories.
4. Measure and evaluate the translation, transaction, economic exposure and
other international risks faced by multinationals.
5. Apply informed investment decisions in an international environment.
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Course Outline
Topic Area
Week
Number
Week
Starting
Foreign Exchange Markets and
Products
International Corporate Governance
and Political Risk
International Monetary Environment
and BOP
Exchange Rate Determination
Foreign Exchange Forecasting
FX Risk Management - Transaction
Exposure
Block preparation
FX Risk Management - Economic
Exposure
FX Risk Management - Translation
Exposure
FX Risk Management
Direct Foreign Investment and CrossBorder Acquisitions
Cost of Capital – Debt and Equity
Multinational Capital Budgeting
This course explores the environment firms face when operating in an international
setting. Most of the course explores international risks confronting firms, including
foreign exchange risk, international product market risk, international competition,
and political risk. With risks come opportunities, so the final two sections of the
course explore international opportunities available to firms, including the ability to
engage in foreign direct investment as well as to raise or place capital
internationally.
The course is self-contained but does draw on, and extend, the material that is
covered in undergraduate international finance text books, such as parity theorems,
FX risk and hedging. The course material is covered using selected chapters from
O’Brien, international finance journal articles and working papers, along with reading
guides to the papers. There is no text book set but most international finance texts
can be used to provide background material for the course.
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Contact/Block course
The Block/classroom part of the course runs over June 18 – July 1st and the format
will consist of:
 presentations by the lecturer of course material (see the lecture overheads
in Stream).
 presentations by students of their selected research papers.
 workshops and tests
Presentation List
Reading
#
1
2
3
4
5
6
7
8
9
Title
WEEK TWO - INTERNATIONAL CORPORATE GOVERNANCE
Spamann, Holger (2009), The “Antidirector Rights Index”
Revisited, Review of Financial Studies (2009)
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R.W. ,
1998, Law and finance, Journal of Political Economy 106 (6),
pp. 1113-1155. No. of peer reviewed citations: 2148.
George Allayannis, Ugur Lel, and Darius P. Miller, 2009,
Corporate governance and the hedging premium around
the world. Electronic copy available at:
http://ssrn.com/abstract=460987
WEEK THREE - THE INTERNATIONAL MONETARY
ENVIRONMENT AND BALANCE OF PAYMENTS
Ferguson, N., Schularick, M., 2011, The End of Chimerica,
International Finance 14 (1), pp. 1-26.
Dooley, M.P., Folkerts-Landau, D., Garber, P., 2004, The
revived Bretton Woods system, International Journal of
Finance and Economics 9 (4), pp. 307-313. Citations 39
Dooley, M.P., Folkerts-Landau, D., Garber, P., 2009, Bretton
Woods II still defines the international monetary system,
Pacific Economic Review 14 (3), pp. 297-311. Citations 8
WEEK FOUR - EXCHANGE RATE DETERMINATION AND
FOREIGN EXCHANGE FORECASTING
Mei Qiu, John F. Pinfold, Lawrence C. Rose, 2011, Predicting
foreign exchange movements using historic deviations from
PPP, International Review of Economics and Finance 20
(2011) 485–497. Citations: 0.
Anomalies, Froot and Thaler, JEP 1990.
Makridakis, S., Taleb, N., 2009, Living in a world of low
levels of predictability, International Journal of Forecasting
25 (4), pp. 840-844. Citations: 1.
WEEK FIVE - FX RISK OVERVIEW - MANAGING
TRANSACTION EXPOSURE
Presenter
8
10
11
12
13
George Allayannis, Michael J. Schill, 2010, Financial policies
and hedging.
M. Bartram, Gregory W. Brown, Bernadette A. Minton,
2010, Resolving the exposure puzzle: The many facets of
exchange rate exposure. Journal of Financial Economics 95
(2), pp. 148-173. Citations: 7.
WEEK SIX - MANAGING ECONOMIC EXPOSURE
George Allayannis, Jane Ihrig, James P. Weston, 2001,
Exchange-Rate Hedging: Financial versus Operational
Strategies, The American Economic Review, Vol. 91, No. 2,
pp. 391-395
J. Lewent and J. Kearney, “Identifying, Measuring, and
Hedging Currency Risk at Merck,” Journal of Applied
Corporate Finance, Winter 1990, 19-28.
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Reading
#
12
14
15
16
17
Title
WEEK SIX & SEVEN - MANAGING TRANSLATION EXPOSURE
George Allayannis, Jane Ihrig, James P. Weston, 2001,
Exchange-Rate Hedging: Financial versus Operational
Strategies, The American Economic Review, Vol. 91, No. 2,
pp. 391-395
Thomas J. O’Brien, Accounting versus economic exposure
to currency risk, Journal of Financial Statement Analysis,
Summer 1997, 21-29
Ziebart D. A. and Kim, D.H., 1987, An analysis of the
market reactions to changes from FASB 8 to FASB 52, The
Accounting Review, pp. 343-357.
WEEK EIGHT - MANAGING FX EXPOSURE
George Allayannis and James P. Weston, 2001, The Use of
Foreign Currency Derivatives and Firm Market Value, The
Review of Financial Studies, Vol. 14, No. 1 (Spring, 2001),
pp. 243-276.
Prof. Dr. Martin Glaum (2011) Selective Hedging of
Exchange Rate Exposures and the Performance of Exchange
Rate Forecasts, SSRN working paper, SSRN.
WEEK NINE - FOREIGN DIRECT INVESTMENT AND
INTERNATIONAL ACQUISITIONS
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19
20
21
22
23
24
25
Baker, Foley, and Wurgler, 2007, Multinationals as
arbirtrageurs? The effect of stock market valuations on
foreign direct investment, Review of Financial Studies.
Malone, C.B., and L.C. Rose, 2006, Intangible assets and
geographic diversification, (2006) International Journal of
Managerial Finance, vol. 2, no. 2, pp. 136-153
WEEK TEN - COST OF CAPITAL – DEBT AND EQUITY
Globalization of Capital Markets and the Cost of Capital:
The Case of Nestle, R. Stulz, JACF, Fall 1995
Exchange Rates and International Differences in the Cost of
Capital, McCaulley and Zimmer, FRBNY Quarterly Review,
1994
WEEK ELEVEN - MULTINATIONAL CAPITAL BUDGETING
Tom Keck, Eric Levengood, Al Longfield, 1998, Using
Discounted Cash Flow Analysis in an International Setting: A
Survey of Issues in Modeling the Cost of Capital, Journal of
Applied Corporate Finance, 11 3.
Valuation in Emerging Markets, McKinsey , Fall 2000
Howell and Chaddick, 1994, Models of political risk for
foreign investment and trade, Columbia Journal of World
10
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Business, 70-91.
Butler and Fauver, 2006, Institutional environment and
sovereign credit ratings, Financial Management, 53-79.
Mahajan, A. (1990) Pricing expropriation risk, Financial
Management 1990, 77-86.
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Learning Structure
Each modules work is allocated a 3½ hour session of contact time and this will be
broken into a session of lecture material, a workshop session, and session for
case/article presentations. The articles are to be read in advance and presented and
discussed in class. A major focus of the course is to learn to read important papers in
international finance and present these in class. The other focus is for students to
obtain a sufficient understanding of the course material to successfully undertake
and pass the tests and final examination.
On the stream site you will find the materials to use on the course:

study guide - lecture slides

journal articles

chapter material from O'Brien, Thomas J. International Financial
Economics : Corporate Decisions In Global Markets

copies of past final examination papers

discussion board

notice board
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Readings and Resources
Required Text
There is no set text, but we have permission to use several chapters of:
O'Brien, Thomas J. (2012) International Financial Economics : Corporate
Decisions In Global Markets. 3rd ed., New York : Oxford University Press,
2005
Recommended Reading
You are expected to keep abreast of current issues relating to the field of
international finance. Please keep an eye on e-news sites like Yahoo.Finance.com.
Examples of good all-round texts to read are as follows:
Eun and Resnick (2009). International Financial Management. 5th Ed, New
York, USA: McGraw-Hill.
Butler, Kirt (1997). Multinational Finance. Cincinati Ohio, USA: SouthWestern College Publishing.
Eiteman David K, Stonehill Arthur I, and Moffett Michael H, (2006)
Multinational Business Finance. Eleventh Edition, Reading,
Massachusetts, USA: Addison Wesley, 2006.
Levi, Maurice D. (1996). International Finance. Third edition, New York,
USA: McGraw-Hill.
Madura, Jeff. (1998 International Financial Management. Fifth edition,
New York, USA: West.
Shapiro, Alan (1999) Multinational financial management, New York,
USA: John Wiley & Sons.
Other references include journals, bank commentaries, company annual reports,
magazines, OECD statistics, and WIKIPEDIA.
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Assessment Overview
Assessment
Due Date
Weighting
Test 1
TBA
10%
Link to Learning
Outcomes
1,2,3,4,5
Test 2
TBA
10%
1,2,3,4,5
Presentations
TBA
20%
Varies
60%
1,2,3,4,5
Final Examination
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Assessments:
Class Presentations:





Each student group will present two (depending on class numbers) of the
readings on offer during the course (see the list above).
Each one is worth 10 marks.
Each presentation will be assigned ½ hour.
A power point summary of the paper should be distributed at the time of the
presentation.
Please let me know by email which of the set papers you want to select,
otherwise they will be assigned.
Test Details
These assessments will be conducted in class, 10% each.
Test 1 will examine material up to and including week 3 of the course. This test will
be mainly focused at the concept and problem level where students are expected to
illustrate their understanding of Foreign Exchange Markets and Products,
International Corporate Governance and Political Risk, and International Monetary
Environment and BOP. This section will be multi-choice in nature. There will be
plenty of practice quizzes that can be used to develop your skills. You will need to be
familiar with the readings as well to answer some short answer questions.
Test 2 will examine material from week 4 - week 7 of the course. The areas covered
are Exchange Rate Determination and Forecasting, FX Risk Management Transaction Exposure and Economic Exposure. This test will also examine a range of
multi-choice problems as well as test your understanding of the readings and
presentation material which will be tested in short answer format.
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Final Examination Details
The final three-hour examination makes up 60% of your total mark.
Purpose:
 to examine your written communications ability.
 to examine your mastery of the learning outcomes in the course.
 to give you a chance to apply the theories, concepts, and techniques covered in
the course.
The exam will include material from all parts of the course.
Dishonesty in any Assessment or Examination
Dishonest practice in connection with any examination or assessment is considered to
be a breach of the Code of Student Conduct. A detailed account of the processes for
resolution of complaints of misconduct, including the procedures for student appeals, is
described in the Disciplinary Procedures for Students available from the Massey
University Policy Guide at http://policyguide.massey.ac.nz (Massey University Calendar
2009).
Aegrotat Consideration and Impaired Performance
Aegrotat
Candidates who have been prevented by illness, injury, bereavement or other critical
personal circumstances from presenting themselves at any examination, compulsory
component, or assessment activity may apply for AEGROTAT consideration. An AEG
pass or DNC grade will be the normal outcome of an application unless a significant
portion of the total formal assessment (normally 50% or more) has been completed
and the paper coordinator considers the award of a letter grade appropriate.
To be awarded an AEG pass, the candidate's University teachers in the paper or
papers affected must be confident that the student would have passed the paper had
the assessment for which the Aegrotat application was made been completed.
Impaired Performance
Candidates who consider that their performance in, or preparation for, any
examination or assessment activity has been seriously impaired due to illness, injury,
bereavement or other critical personal circumstances may apply for Impaired
Performance consideration.
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For impaired performance applications, paper coordinators will assess the typical
performance of a student during the paper and, where the student's performance for
the assessment item covered by the application was atypically poorer than that
achieved in other assessment tasks, and in relation to the overall class performance
for the assessment in question, assign a mark for the assessment item and an overall
letter grade for the paper based upon this information.
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APPENDICES
Appendix 1 - Plagiarism
Using someone else’s ideas/or work without citing the source is plagiarism and is not
acceptable. The University Calendar states that there are strict penalties for
plagiarism. Plagiarism applies to any material: written, spoken, recorded, electronic,
broadcasted, visual, performance or other medium.
If you use the words of another author you must enclose them in quotation marks.
You must cite a page number and the full reference in the Reference List. When you
have included the ideas of another author you are required to reference the source
of those ideas.
Contact the Student Learning Centre for information on how to avoid plagiarism.
Penalties for Plagiarism
The School of Finance supports and will rigorously enforce the Massey University
policy on plagiarism. The School of Finance will take the following actions when
plagiarism is discovered:
i
Where there is clear evidence that a student has copied another student’s
work, neither of the students involved will receive marks for the work.
ii
For repeated offences or other serious transgressions, more serious
penalties, such as failure in a whole paper or exclusion from the University,
may be imposed.
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Appendix 2 - References
Citing References
The reference system used should enable you to indicate the source of facts and
opinions without interrupting the flow of your argument, and it must enable a
reader to check and pursue these citations quickly and economically. These
guidelines are based on the APA (American Psychological Association) referencing
system. APA (2001). Publication manual (5th ed.). Washington, DC: American
Psychological Association.
When a reference is made in the body of the assignment it is sufficient to mention
the name of the author, the year of publication, and the page number, e.g.:
“..it has been urged (Kotler, 1986, p.9) that …”, or
“..it has been urged by Kotler (1986, p.9) that …”
Cite electronic sources as for other texts. Where page numbers are not provided,
use the paragraph number, if available, preceded by the paragraph symbol or the
abbreviation para. If neither paragraph nor page numbers are visible, cite the
heading and the number of the paragraph following it to direct the reader to the
location of the material.
“.. Myers (2000, p. 5) believes..,” or
“.. (Beutler, 2000, Conclusion section, para. 1)..”
Reference List
All references cited in the text must be reported in full standard bibliographical form
under a heading “References” at the end of the assignment.
The references should be arranged alphabetically by author’s surname.
When listing references, all lines except the first should be indented five spaces
(typically one tab stop). Note the use of italics (or underlining), capitalisation,
punctuation and order of elements. For a book, italics should be used for the title.
For journal articles, the title of the journal, and the volume number, should be
italicised. If your word processor or printer cannot do italics, underline these
elements.
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The preferred format for different types of publications is as follows:
Books
Biggs, J.B., & Tang, C. (2007). Teaching for quality learning at university: What the
student does. (3rd ed.). New York: Open University Press.
Ramsden, P. (1997). The context of learning in academic departments. In F. Martin,
D. Hounsell, & N. Entwistle (Eds.). The experience of learning (2nd ed.) (pp. 198216). Edinburgh, Great Britain: Scottish Academic Press.
Sligo, F. (1991). Organisational behaviour: Case studies and commentaries.
Palmerston North, New Zealand: Dunmore Press.
Stephenson, J. (Ed.). (2001). Teaching and learning online: New pedagogies for new
technologies. London: Kogan Page.
Periodicals
Becker, L.J., & Seligman, C. (1981). Welcome to the energy crisis. Journal of Science
Issues, 37(2), 1-7.
Emerson, A-M. (1991, December 10-17). Bald is beautiful. The Listener, p. 16.
Tait, A.R. (2004). Clinical governance in primary care: A literature review. Journal
of Clinical Nursing, 13, 723-730.
Battling the stress monster. (1996, June/July). Safeguard, 17-22.
N.B. use this style when no author is identified or use (n.a.) where author’s name
would usually be, date then title.
Occasional publications
Irons, B. (1996, April). Quality study guides. Paper presented at the DEANZ
Conference, Queenstown.
Wifley, D. E. (1989). Interpersonal analysis of bulimia: Normal-weight and obese.
Unpublished doctoral dissertation. University of Missouri, USA.
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Electronic Periodicals
Campbell, I. (2003). The obesity epidemic: Can we turn the tide? Heart, 89(Suppl. 2),
ii22-ii24; discussion ii35-ii37. Abstract retrieved May 21, 2003, from MEDLINE
database.
Stiles, P. (2001). The impact of the board on strategy: An empirical examination
[Electronic version]. Journal of Management Studies, 38(5), 627-650.
Internet
All references begin with the same information that would be provided for a printed
source (or as much of that information as possible). The web information is then
placed at the end of the reference. It is important to use “Retrieved from” and the
“date” because documents on the web may change in content, move, or be removed
from a site altogether.
Zheng, L., & Smaldino, S. (2003). Key instructional design elements for distance
education. The Quarterly Review of Distance Education 4(2), 153-166.
Retrieved 15 May 2006, from ERIC database.
Health of older people in New Zealand. (n.d.). Retrieved May 21, 2003 from
http://www.moh.govt.nz/olderpeople
Note: (n.d.) = no date
Begin with the title when no author is identified.
Court Reporter. (2002, November 21). Alcohol-fuelled driving appals judge.
Manawatu Evening Standard. Retrieved May 21, 2003, from
http://www.stuff.co.nz/stuff/eveningstandard/0,2106,2489959a6502,00.html
Stephens, D. (2003, April 24). Why do some people have such a need for control?
[Msg 430]. Message posted to http://groups.yahoo.com/group/abusesurvivors-with-ptsd/message/430
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Appendix 3 - Presentation of written work
Presentation is an important area. Assignments that are succinct, with an active
writing style are preferred. University plagiarism rules must be observed.
Please consider the following areas when you do your assignment:
 description of, and understanding of relevant issues
 using evidence to support any viewpoints
 definitions and logical development
 referencing
Additionally, please provide your full names and student id numbers on the
document.
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