2023-2024 / FINA0028-5

International Finance


30h Th

Number of credits

 Master in economics : general (120 ECTS)5 crédits 
 Master in management (120 ECTS)5 crédits 
 Master in business engineering (120 ECTS)5 crédits 
 Extra courses intended for exchange students (Erasmus, ...)5 crédits 


Caterina Santi

Language(s) of instruction

English language

Organisation and examination

Teaching in the first semester, review in January


Schedule online

Units courses prerequisite and corequisite

Prerequisite or corequisite units are presented within each program

Learning unit contents

In today's globalized world, managers, investors and policy-makers need a deep understanding of the international environment and its underlying mechanisms to take sound financial and strategic decisions.

The course is a seminar of financial economics and empirical international finance that focuses on foreign exchange (fx) rates theory and international parity conditions. In particular, the following topics will be covered: 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, drivers of fx rate changes) and, more importantly, international parity relationships. Moreover, we will discuss foreign exchange rate risk, economic exposure, and political risk.  Finally, we will present hedging strategies to mitigate foreign exchange rate risk.

The course is divided into two parts:

1) The first part will focus on presenting established theories of exchange rate behaviour 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.

2) The second part will consist in the redaction of a report (per group), aiming at presenting the solution to a real-life case study in International Finance. Students are expected to present their solution to the case study during a seminar session.

Theories will be complemented with exercises. Academic papers will be used to discuss the empirical evidence.

Learning outcomes of the learning unit

At the end of this course students will be able to:

- Understand, explain, and synthetise the organization and the general functioning of FX markets.

- Analyse the drivers of FX rates, and how they can be used to explain and anticipate some of the variations in FX markets.

- Understand the theoretical international parities driving FX markets and explain these concepts.

- Criticize and assess these theories with a focus on their empirical limitations.

- Read and understand cutting-edge scientific research on exchange rate.

- Understand FX rate risk and hedging strategies to mitigate it.

- Apply theories to solve real-life case studies in International Finance.

Specific skills and competences trained during this course.

At the end of this course students will have:

- Strengthened their knowledge and understanding of international market 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 teamwork abilities.

- Developed basic programming and statistical analysis skills.

- Developed a transversal, interdisciplinary and global vision.

- Developed their critical thinking.

- Strengthened their professional capacity for oral communication.

- Strengthened their professional capacity for written communication.

Prerequisite knowledge and skills

- Fundamentals in macroeconomics (understanding of key aggregates, fundamental of trade, dynamic of market forces, definition of interest rates and commodities). A course like International Macroeconomics (ECON0307) is a good prerequisite.

- Fundamentals in finance (notion of arbitrage, net present values, financial markets). A course like Applied Financial Instruments (FINA0068), Financial Derivatives (FINA0052) or Banking and Insurance (FINA0051) is a good prerequisite.

- Fundamentals in statistics (introductory econometrics, notion of univariate regression models, how to conduct hypothesis tests). Courses like Empirical Methods in Financial Markets (FINA0060), Financial Risk Modelling (FINA0064), Financial Data Modelling (FINA0063) or Advanced Econometrics (ECON0213) are good complement.

Planned learning activities and teaching methods

The course is primarily a lecture, based on the book "International Finance: Theory Into Practice", by Piet Sercu. During these sessions, the theoretical notions will be introduced and illustrated by practical exercises.

Secondly, the students are expected to work in groups to write a report to present the solution to a real-life case study in International Finance.

Finally, students are expected to present their solution to the case study during a seminar session.

Mode of delivery (face to face, distance learning, hybrid learning)

Face-to-face course

Additional information:

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 in group to solve a case study in International Finance.

Recommended or required readings

International Finance: Theory Into Practice, by Piet Sercu

Uncertainty and deviations from uncovered interest rate parity, Ismailov and Rossi (2017), Journal of International Money and Finance.

Can oil prices forecast exchange rates? An empirical analysis of the relationship between commodity prices and exchange rates, Ferraro et al. (2015), Journal of International Money and Finance.

Predicting Exchange Rates Out of Sample: Can Economic Fundamentals Beat the Random Walk? Li et al, (2015), Journal of Financial Econometrics.

Uncovered interest rate parity and the term structure, Bekaert et al. (2007), Journal of International Money and Finance.

Carry trades and currency crashes, Brunnermeier et al. (2008), NBER working paper.

Exam(s) in session

January exam session

- In-person

written exam ( multiple-choice questionnaire, open-ended questions )

August-September exam session

- In-person

oral exam

- Remote

oral exam

Written work / report

Continuous assessment

Additional information:

In the first exam session (January), the final grade will be determined by the following three parts:

Written test (60%)

Explain international parities, what is the theoretical rationale 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. Explain various notions related to systemic risk. 

Case Study Report (25%)

Per group, write a report presenting the solution to a real-life case study in International Finance. The case study will be communicated in October.

Presentation and Participation (15%)

Students are expected to present their solution to the case study during a seminar session.

Work placement(s)


Organisational remarks and main changes to the course



Caterina Santi, Ph.D. | Assistant Professor of International Finance
HEC - Management School of the University of Liège 
Office 104 Bat N1 - Rue Louvrex, 14, 4000 Liège, Belgium

email : Caterina.Santi[at]uliege.be

Association of one or more MOOCs

There is no MOOC associated with this course.

Items online

online notes
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.