2018-2019 / FINA0028-5

International Finance

Durée

30h Th

Nombre de crédits

 Master en sciences économiques, orientation générale, à finalité5 crédits 
 Master en sciences de gestion, à finalité5 crédits 

Enseignant

Julien Hambuckers

Langue(s) de l'unité d'enseignement

Langue anglaise

Organisation et évaluation

Enseignement au premier quadrimestre, examen en janvier

Horaire

Horaire en ligne

Unités d'enseignement prérequises et corequises

Les unités prérequises ou corequises sont présentées au sein de chaque programme

Contenus de l'unité d'enseignement

Financial operations performed on open and integrated markets expose investors to a series of risks and challenges. In today's globalized world, managers, investors and policy-makers need a deep understanding of this international environment and its underlying mechanisms to build sound financial and strategic decision-making.   In light of these considerations, the course will examine the following issues:
The first (and principal) part of the course focuses on foreign exchange (fx) rates: fx rate fundamentals (definition, distinction between direct vs. cross, real vs. nominal and spot vs. forward fx rates), fx rate dynamics (how are markets organized, who is participating in these markets, how do we arbitrage on these markets?),  international parity relationships as well as more structural and/or institutional parameters of fx markets (exchange rate regimes, roles and objectives of central banks, trade and capital flows). Lastely, the course focuses on FX rate determination, and the comparison between PPP/UIP theory and empirical evidence. A big part of the course will be dedicated to study recent findings in empirical finance highlighting the determinants and the predictability of FX rates.
The second part of the course concentrates on international investment issues: the identification, measurement, and management of exchange rates and international exposure. Especially, investement strategies based on FX rates and interest rate differential will be discussed. We will also review empirical findings related to cross-country investment strategies. Lastely, we will discuss practical problems of multinational corporate finance decisions through Harvard Business Cases.

The course focuses on presenting established theories and to compare their implications with empirical evidence. The goal is to provide the student with the necessary knowledge to understand the limitations of those theories, and the necessary intellectual tools to investigate and challenge empirical questions leading to investment decisions on international financial markets.

Acquis d'apprentissage (objectifs d'apprentissage) de l'unité d'enseignement

At the end of this course students will be able to
- understand the organization and the general functioning of FX markets; 
- understand the international parities driving FX markets, and the risks that investors face in an international financial environment;
- recommend financial tools to manage currency risks; - analyse the drivers of FX rates, and how they can be used to explain and anticipate some of the variations in FX markets;
- read and understand cutting-edge scientific research on exchange rate, and replicate empirical findings.

Specific skills and competences trained during this course.
At the end of this course students will have:
- strengthened their knowledge and understanding of macroeconomic, finance and management disciplines - in particular in international finance;
- strengthened their capacity to research autonomously and methodically the information needed to solve a complex, transversal real-life economic and/or management problem, to perform a rigorous analysis of the problem at hand and to provide economically sound solutions; 
- understood the transversal role of quantitative reasoning, gained knowledge and understanding of these quantitative reasoning techniques and developed the ability to mobilize them in order to solve real-life economic and/or management problems or cases;
- developed their ability to speak in English; 
- developed team work abilities;
- developed basic programming and statistical analysis skills;
- developed a transversal, interdisciplinary and global vision;
- developed their critical sense (arguing);
- strengthened their professional capacity for oral communication;
- and strengthened their professional capacity for written communication.

Savoirs et compétences prérequis

Basics in macroeconomics (understanding of key aggregates, fundamental of trade, dynamic of market forces, definition of interest rates and commodities) , finance (notion of arbitrage and net present values), and statistics (what is a regression model)

Activités d'apprentissage prévues et méthodes d'enseignement

The course is primarily a lecture, based on the book "International Finance and Open-Economy Macroeconomics", by G. Gandolfo. During these sessions, the theoretical notions will be introduced. Additionally, the presented concepts will be illustrated by real-case examples and exercises (especially related to financial derivatives). A practical focus will be given to investment decisions in international markets.
Secondly, the students are expected to work (in groups) on a seminar paper, which consists in replicating some of the important empirical findings in the literature regarding international parities. To this end, the students are expected to gather FX rates, interest rates and oil prices data, and to conduct a regression analysis in the spirit of the referenced papers.
Lastly, the possibility will be given to the students to present their work and to debate about it.

Mode d'enseignement (présentiel ; enseignement à distance)

The course consists in a face-to-face lecture, and a series of discussions/group work based for the exercises. The students are expected to work by themselves on the seminar paper.

Lectures recommandées ou obligatoires et notes de cours

International Finance and Open-Economy Macroeconomics, by G. Gandolfo (Springer, 2nd edition)

Modalités d'évaluation et critères

The final grade will be determined by the following three parts:
 
Written exam
Explain international parities, what is the theoretical rationals behind, and what are the empirical evidence for and against these theories. Explain the various financial risks faced on international markets, and what are the tools to manage those risk. Solve exercises regarding the use of FX rates-based derivative products. Solve a case study, regarding an investment problem in the financial markets, explaining which management decisions are taken, and why (monetary quantification of the decision, rational in light of theoretical concepts).  
Seminar paper
Per group, replicate the empirical studies proposed in either "Uncertainty and deviations from uncovered interest rate parity" (A. Ismailov and B. Rossi, JoIMF, 2017) or "Can oil prices forecast exchange rates - an empirical analysis of the ralationship between commodity prices and exchange rates" (F. Ferraro et al., JoIMF, 2015). This list might evolved regarding preferences and profiles of the students attending the class. Then, in a 10-page research paper, the students are invited to present the problem of the reference the paper, as well as their analysis of the issue, and to compare the various results.

Participation
Depending on the number of participants, possibility will be given to the students to present their research paper. Presentation and active participation will lead to bonus points.


Weights between the different parts will be announced in October.

Stage(s)

none

Remarques organisationnelles

none

Contacts

Julien Hambuckers, Ph.D. | Assistant Professor of Finance
HEC - Management School of the University of Liège (Belgium) 
Rue Louvrex, 14, B-4000 Liège Belgium

email : jhambuckers[at]uliege.be

Notes en ligne

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The core materials for the course consist of the required textbook readings and additional readings posted on the course web page. Lecture notes will be available on the course web page. Other items such as problem sets and case questions will also be available on the course web page. Some additional readings on materials related to the course over the term may be provided throughout the course via the course web page.