1. Spot markets for foreign currency (core reading: Sercu, chapter 3)

2. Forward markets for foreign currency (core reading: Sercu, chapters 4 and 5)

3. Currency options (core reading: Sercu, chapters 8 and 9)

4. Relevance of hedging foreign exchange risk (core reading: Sercu, chapter 12)

5. Measuring and managing currency exposure (core reading: Sercu, chapter 13)

6. International cost of capital (core reading: Sercu, chapter 19)

7. International capital budgeting (core reading: Sercu, chapter 21)

The aim of this course is to introduce students to the international dimension of financial management. Firms acquiring and investing funds not only in the domestic market but also beyond borders encounter a broader set of opportunities but also face additional risks. Upon completion of this course, students will have an understanding about (i) the mechanics of currency markets and its most important instruments, (ii) how these instruments can be used to measure and manage risks associated with international financial management, and (iii) how to set the cost of capital and adjust standard capital budgeting for international projects.

Lecture mixed with exercises

Exercises, quiz, final exam

Appointment via email.

Lecture slides, handouts, and exercises will be provided on Learn-at-WU in due course.

Unit	Date	Contents
1		Spot markets: exchange rates, major FX markets, law of one price, real exchange rates
2		Forward markets: introduction to forward rates, links between FX and interest rates, covered interest parity, valuation of forward contracts
3		Forward markets: arbitrage, hedging, speculation, least cost dealing
4		Currency options: introduction, institutional aspects, arbitrage, hedging, speculation
5		Currency options: valuation, binomial model, Black-Merton-Scholes model
6		Relevance of hedging: financial distress, agency costs, expected taxes, information costs
7		Measuring and managing FX exposure: contractual exposure, operations exposure, translation exposure
8		Estimating the cost of international capital, single country CAPM, international CAPM
9		International capital budgeting, discounted cash flows, NPV, Adjusted NPV