International Finance

Module Code

FINU9FB

Semester                           

Autumn

Prerequisites                   

FINU9F4

SCQF Level

10

Credit value

20

Module Co-ordinator   

Dr Dionysia Dionysiou

Assessment      

20% Class Test, 20% Coursework, 60% Examination

Module introduction, aims and objectives

This module will provide an understanding of the key areas of finance within an international environment. Attention will be focused on:

  • the operation of the foreign exchange market
  • the relationship between exchange rates, interest rates and inflation rates
  • the impact of EMU and the euro
  • the nature of foreign exchange risk and its management
  • the use of the main derivative products (futures, options & forwards) in international finance
  • international investments and the financing of overseas projects

Learning outcomes and skills development

By the end of the module students should be able to:

  • Understand the technical language used in international finance
  • Understand the mechanics of the foreign exchange market and how exchange rates are quoted
  • Identify and exploit opportunities to make money from currency arbitrage
  • Understand the factors that drive exchange rates, and in particular how spot and forward exchange rates are related to interest rates and inflation rates
  • Identify and exploit opportunities to make money from covered (and uncovered) interest arbitrage
  • Understand the significance of government influence on exchange rates and in particular the impact of the European Exchange Rate Mechanism (ERM) and Economic and Monetary Union (EMU)
  • Understand the concept of an ‘optimal currency area’ (OCA) and its potential application to the countries which comprise the Eurozone
  • Appreciate the impact of the introduction of the euro for companies and for financial institutions operating within and outside the Eurozone
  • Appreciate the types of foreign exchange risk faced by exporters, importers and multinational companies
  • Calculate the hedged domestic value of future foreign currency cash flows using a money market hedge and a forward market hedge
  • Appreciate the differences between the major derivative instruments
  • Identify the types of foreign exchange risk and interest rate risk for which derivatives may be used as hedging instruments and the circumstances in which their use may be appropriate
  • Understand the benefits and risks of international portfolio investment 
  • Identify the different ways in which foreign projects may be financed
  • Understand why the cost of capital may be different for a multinational company than for a comparable domestic firm

Transferable skills

In addition it is expected that the module will provide an opportunity to develop, inter-alia, the following personal transferable skills:

  • analytical thinking and problem-solving
  • condensing information
  • methodical work through planning and prioritisation
  • listening skills

Accreditation

Please note that this module forms part of an accredited degree (BAcc single and joint), and successful completion of this module is required to gain exemptions from the examinations of a number of professional bodies including ICAS (Institute of Chartered Accountants of Scotland), CIPFA (Chartered Institute of Public Finance and Accountancy), CIMA (Chartered Institute of Management Accountants) and ACCA (Association of Chartered Certified Accountants).

Introductory reading

The core text book for this module is:

Madura, Jeff & Fox, Roland, International Financial Management, 3rd edition, Thomson, 2014 (Essential purchase).


This module information is representative of what is included in the module in a given year. Details of actual reading, lectures and coursework may vary year to year and will be available at the beginning of the semester.

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