International Financial Markets

Course Description

International banking in a modern setting. Exchange rates and exchange market regimes, theory of and innovation in international banking, the foreign presence, the international debt problem, regulation and risk-based capital adequacy guidelines. This course covers the elements of financial markets, financial securities and how they are valued and traded. The perspective is that of the investment manager, responsible for the investment portfolios of insurance companies, banks, pension funds, mutual funds, endowment funds and personal trusts. What we cover in this course has obvious implications for stock selection strategies by individuals and for financial decisions within firms. The aim of this course is to give students an understanding of the dominant evolutions in the fields of international banking, international financial flows, and the determinants of the growth of financial centers. Special attention will be given to Pakistan and South-East Asia.

Target Audience

International Financial Markets is ideally suited for those employed by corporations, especially in the field of finance, planning and treasury areas, in consulting or by financial institutions or investment banks, whether in trading, research, capital markets, corporate finance, asset management or emerging markets.

Aims

International Financial Markets will equip you with the tools, knowledge and insights needed to:

• understand how spot and currency markets work
• interpret how exchange rate behaviour can influence corporate decision-making
• increase value through hedging exposure to exchange rates using derivatives
• structure financial instruments to take advantage of accounting regulations
• use international bond and swap markets to make cross-border financing decisions
• use swaps to take advantage of differences in international law
• evaluate relative costs of financing in Dollars, Eurodollars or Yen
• understand the cost of capital for cross-border (including emerging market) investments
• value projects exposed to currency and sovereign risk.

Course Contents

International Financial Markets is divided into four parts:

• Currency markets and the behaviour of the exchange rate
  Here the focus is on understanding the working of spot and forward currency markets, and the implications of the empirical behaviour of exchange rates for corporate decisions.
• Markets for exchange-rate derivatives and the hedging decision
  This section examines how firm value can be increased by hedging contractual and operating exposure to exchange rates using derivatives such as currency options and futures.
• International fixed income markets and the financing decision
  The third part of the programme looks at how to use international bond markets and swap markets to make cross-border financing decisions.
• International equity markets and the investment decision
  The final part of the programme examines the cost of capital for cross-border investments, including investments in emerging countries.