Course description

Multinational Corporate Finance

Introduction

The overall goal of the course it to provide the participants with a sound understanding of financial decision-making in the multinational firm. However, whilst the course is presented from a managerial perspective and thus applied in nature, decision-making is approached using firmly established theories in economics and finance.

Course content

  1. Introduction: Globalization and the Multinational Firm
  2. The International Monetary System: Balance of payments and supply and demand in the FX-market, FX-rate regimes
  3. Foreign Exchange Market: Market participants, contracts traded, FX-rate quotation, interbank market, market microstructure
  4. Parity Relationships: covered and uncovered interest parity, purchasing power parity, international Fisher effect
  5. Forecasting Exchange Rates: forecasting FX-rate level and variance, forecast performance measures, forecasts based on economic models and technical analysis, carry trades
  6. Currency Futures and Options: pricing and hedging
  7. Transaction (contractual) Exposure: financial hedging, special hedging problems, alternative hedging approaches
  8. Operating Exposure: measuring this exposure, financial and operational hedging
  9. Foreign Direct Investment, Political and Country Risks: determinants of country risk, measurement, and consequences for capital budgeting
  10. Domestic and International Capital Structure and the Cost of Capital
  11. Domestic and International Capital Budgeting

Learning outcome knowledge

The course can be broadly split into three parts. The first part of the course examines international financial markets and the determination of exchange rates. In the second part, we will consider the impact of exchange rates on the cash flows of firms. In particular, we will learn how to measure and manage (hedge) how different cash flows are exposed to unexpected changes in exchange rates. The third part of the course focuses on some traditional issues in corporate finance such as capital budgeting, cost of capital, and investments in physical assets.

Exam organisation

  • Written assignment: 10%
  • Written assignment: 20%
  • Written exam: 70%