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Home 2015-2016 Undergraduate College Catalog Course Offerings Finance (Graduate Program) Courses MFIN 5501: International Finance (3 cr.)

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MFIN 5501: International Finance (3 cr.)

This course is an overview of international

financial markets and institutions. Topics

include an introduction to the foreign exchange

markets, in which nearly $4 trillion worth of

currencies and foreign exchange derivatives are

traded each day. Several types of products trade

in these markets, including spot transactions,

forward transactions, swaps and options. Much of

this activity is due to commercial banks and

securities dealers, along with corporations

seeking to hedge their exposure to foreign

exchange risk. In addition, central banks may

periodically intervene in foreign exchange

markets in order to pursue domestic policy goals.

The factors that determine the value of exchange

rates and the relationship between nominal and

real exchange rates is also covered in detail,

along with several international parity

conditions such as purchasing power parity, the

International Fisher Effect, and interest rate

parity. The course also explores different

strategies for hedging foreign exchange risk.

Pricing models for each type of derivative are

also examined. A variant of the Black-Scholes

model, the Garman-Kohlhagen model, is used to

price foreign exchange options as well as derive

several measures of risk that are collectively

known as the Greeks. The course closes with a

closer look at the role of central banks in

foreign exchange markets, alternative exchange

rate systems, international investment and

diversification, and the management of portfolios

of domestic and foreign bonds.

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