CREDITS 2 (LV) 3 (ECTS) - 30 Contact Hours
This course develops a broad conceptual framework for making international financial decisions. Topics include purchasing power parity, spot and forward rate fundamentals, foreign exchange risk, valuation of financial derivatives and portfolio insurance. The intent is to provide an effective base of information so that students understand the issues and risks involved in international financial management and have exposure to some of the tools to manage these risks efficiently and effectively.
We discuss the impact of domestic and foreign interest rates and currency exchange rates on the financial success of a business. Using the no arbitrage argument, the complexity of financial markets is explained, followed by technical means to insure against a “bad” development of the currency exchange rate. We continue with pricing models of financial put and call options and the cost and benefits of using them in actual international business.
The ‘story’ of International Financial Management will be illustrated along Porsche’s attempt to take over Volkswagen.