International Financial Management

The objective of this course is to develop the ability to understand and manage the particular financial challenges of multinational firms. These firms buy, sell, invest and source capital in foreign markets. They are thus faced with currency rate risk as well as risk related to foreign interest rates. Currency and interest rates are related to each other and to inflation and economic development. International financial management involves measuring risk exposure, evaluating the various options available in financial markets for dealing with the risks and making value maximizing decisions.

The course primarily covers topics that do not build on elective courses. Thus required courses from first two years suffice although some concepts from elective courses, Corporate Finance (Foretaksfinans) and International Economics in particular, are useful.

No prerequisites.

Knowledge

The student

• appreciates the complexities involved in international financial transactions.
• understands the various factors that help determine exchange rates.
• can calculate foreign exchange risk exposures.
• understands the various risk mitigation techniques, such as derivatives, that can be used to hedge foreign exchange rate risks.

Skills

The student can

• apply financial theory in analysis of complex risk management problems faced by multinational firms.
• develop risk mitigating strategies exploiting instruments that are traded in international financial markets.
• assess value effects for the firm's owners of risks and risk mitigating techniques in order to devise value maximizing strategies

• The international financial environment
• Theories of exchange rate determination
• The international monetary system
• Exchange rate behavior
• Exchange rate risk management
• Currency derivatives
• Asset and liability management in international context

The course material is discussed in lectures. Instructor provides suggestions for voluntary exercises. And students work individually or in groups with assignments that count towards final grading.

No course requirements.

Grading is based on one assignments during the term and written exam at the end of the term. The assignment (up to 5 pages), that is carried out individually or in groups of up to three students, count a total of 25 % towards the final grade. The four-hour, written exam counts 75 %.

No formal grading decisions are made until after the final exam and only the final grade can be challenged. Students retaking the course must redo both assignments and the exam.

Letter grading A-F.

An external and an internal examiner decide the final grade for the course based on an overall assessment.