International Corporate Finance

Introduction

In today’s globalized world, all financial decisions, such as investments, mergers and acquisitions, have international dimensions. The international dimension adds additional challenges and layers of complexity. In particular, exchange rates and cross-country differences in regulation, taxation, political risk and governance quality all impact the way financial decisions are made.

This course aims to provide the participants with a sound understanding of financial decision-making in the multinational firm. The course is applied in nature and can be broadly split into three parts. The first part of the course covers the basics of exchange-rate determination, including payment systems and the organization of foreign exchange markets. The second part covers instruments to manage and hedge exchange-rate risk. The third, and most important part of the course, focuses on the financial management of the multinational firm. It covers some traditional issues in corporate finance such as capital budgeting, cost of capital, and investments in physical assets. Particular stress will be put on making corporate finance decisions in a multinational firm when sustainability and climate risks are also taken into account.

Course content

1. Basics of Exchange Rate Determination
   1. The Multinational Firm and the International Monetary System
   2. The Foreign Exchange Market – Triangular Arbitrage
   3. The Foreign Exchange Market - Parity Relations
2.  Hedging foreign-exchange risk
   1. Forwards and futures
   2. Currency options
   3. Swaps
3. Financial management of the multinational firm
   1. Foreign exchange exposure and management
   2. Foreign direct investment and cross-border acquisitions
   3. International capital structure and the cost of capital
   4. International capital budgeting
   5. Multinational cash management
   6. International trade finance
   7. International tax environment and transfer pricing
4. Special topic in International Corporate Finance