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Centre for Financial & Management Studies (CeFiMS) - University of London

Individual Professional Courses – IPC    

Finance in the Global Market [FFL108]

Introduction

This course engages with one of the most prominent features of modern finance: its globalisation. Although international finance has a long history, financial markets today are international in ways that have not been seen before. Trading in equities, corporate bonds, government bonds and debt and securities of all kinds occurs across borders and on a global scale by business, all organised by global corporations.

The main objective of the course is to enable you to understand some of the main characteristics of that globalised financial world. Because of the centrality of foreign exchange markets to international finance, we regard understanding foreign exchange markets as the core of that objective.

Aims & Objectives

When you have completed the study of this course and its readings you should:

  • Have a sound understanding of the strengths and weaknesses of models of exchange rates

  • Be able to explain hedging techniques

  • Understand the implications of global finance for firms' financing decisions

Resources

Students receive a looseleaf binder containing eight ‘course units’; these texts are carefully structured to provide the main teaching and are equivalent to traditional course lectures, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. Two assignments (to be marked by your CeFiMS tutors), and a specimen examination paper are also included within the student pack, along with the following:

Textbook:

David Eiteman, Arthur Stonehill, Michael Moffett: Multinational Business Finance, Tenth Edition, Addison Wesley, 2003, ISBN 0321204700

Readings:

A compilation of further readings: recently published articles or seminal writings which augment and illustrate the main text.

Course Timetable:

This shows the linkage between the various components of the course and indicates the schedule for reading the texts, submitting assignments, etc.

Course Content

Unit 1: The International context of finance

This unit outlines and explains the historical development of international exchange rate systems, the evolution leading to the globalised finance of today. This evolution provides the context for investors' and firms' international finance.

Unit 2: The markets for foreign exchange

In this unit you study the main characteristics of the markets for foreign exchange and the types of instruments that are traded. Transactions include not only spot (immediate) transactions, but also forward contracts, futures, swaps, and currency.

Unit 3: Exchange rates and prices

This unit enables you to study one fundamental theory of what determines the level of exchange rates. Purchasing power parity theory relates exchange rates to countries' relative price levels.

Unit 4: Exchange rates and interest rates

In this unit the Univesity examine a different set of forces determining exchange rates: their relation to interest rates. The theoretical framework is the uncovered interest parity model.

Unit 5: Managing foreign exchange exposure

In this unit you study the financial techniques firms and investors can use to manage foreign exchange risk. the Univesity examine how they can reduce or increase their exposure to foreign exchange risk by hedging through using derivatives.

Unit 6: International corporate financing and project finance

Here you study how and why firms raise money on foreign equity and bond markets. the Univesity examine the contrast between such corporate finance and project finance.

Unit 7: Capital structure and cost of capital in international financing

In this unit we study the potential effects on a firm's cost of capital and on its capital structure of financing the firm on international markets.

Unit 8: Corporate finance and currency crises

In this unit the Univesity examine the relationship between currency crises and coporate finance. In the light of the Asian crises of 1997-98 the Univesity examine the effect of corporate finance on currency instability and the effect of the crisis on corporate finance.

Tuition & Assessment

One two-hour examination and one assessed piece of written coursework in each module. Each course module will count for 10% of the total mark. Of this 10%, the examination will count for 70% and the coursework for 30%.