THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS School of Economics and Finance. FINA0105 International Financial Management

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1 THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS School of Economics and Finance BE103/512 FINA0105 International Financial Management GENERAL INFORMATION Instructor: Dr. Sandy Lai Office: TBA Phone: TBA Lecture: Thursday 1:30pm- 4:20pm in RHT Consultation times: TBA Tutor: to be confirmed Pre-requisites: TBA Co-requisites: TBA Mutually exclusive: Course Website: Other important details: COURSE DESCRIPTION This course extends the principles of Finance to an international context. In an international context, investors and corporations embrace an expanded set of investment opportunities, yet they also face additional risks. The course gives an overview of international financial environment, and covers issues including currency exposure, international parity conditions, foreign exchange risk management, international asset pricing, international investment strategies, and currency hedging for international stock portfolios. COURSE OBJECTIVES 1. To provide students with basic knowledge regarding the interaction between economic factors and currency movements; 2. To develop students ability to analyze the extent of currency exposure faced by any multinational corporation; 3. To advance students knowledge in currency derivate contracts and the use of such contracts for hedging and investment purposes. 4. To enhance students ability to analyze the relative benefits of various international investment vehicles. COURSE LEARNING OUTCOMES Course Learning Outcomes CLO1 Analyze the effect of economic policies on foreign exchange rate movements CLO2 Manage foreign currency exposure for multinational corporations CLO3 Propose workable currency trading strategies CLO4 Evaluate the relative strength of international equity markets and devise adequate international portfolio investment strategies Aligned Programme Learning Outcomes PLO1,2,3 PLO2,3,4,5 PLO2,3,4.5 PLO2,3,4,5 COURSE TEACHING AND LEARNING ACTIVITIES Course Teaching and Learning Activities T&L1. Lecture with interactive presentation T&L2. Tutorial and e-forum discussions Expected contact hour 36 hours 12 hours Study Load (% of study) 30% 10%

2 T&L3. Case-based study and analysis T&L4. Self study 30 hours 42 hours 25% 35% Total 120 hours 100% Assessment Methods Brief Description (Optional) Weight Aligned Course Learning Outcomes A1. Class Participation Students are encouraged to attend the class regularly and participate in class discussion. 10% COL1, 2, 3, 4 A2. Project Presentation Students must choose a project topic and present their analysis on the topic at the end of the semester. 30% COL 1, 2, 3, 4 A3. Mid-term Examination A4. Final Examination STANDARDS FOR ASSESSMENT Course Grade Descriptors This is a close-book examination to be held during the middle of the semester to assess students learning outcome.. This is a close-book examination to be held at the end of the semester enabling students to demonstrate what they have learned from this course. 20% 40% Total 100% COL 1, 2 COL 2, 3, 4 A+, A, A- B+, B, B- C+, C, C- D+, D F Candidate has consistently demonstrated a thorough grasp of the subject as evidenced by original or exceptionally astute analysis and synthesis. Candidate frequently demonstrated a substantial grasp of the subject. Candidate demonstrated some knowledge about the subject. Candidate s solutions to questions and problems indicated that the candidate has basic familiarity with the subject but need to be put in substantial efforts to bring his or her knowledge of the subject to a satisfactory level. Candidate showed little evidence of basic familiarity with the subject. Assessment Rubrics for Each Assessment A1. Class Participation You re strongly encouraged to attend class lectures regularly as well as participate in class discussion. 5 out of the 10 class participation marks will be based on your class attendance record. I ll check attendance 5 times throughout the semester. Each accounts for 1 mark. The other 5 marks will be based on how actively you participate in class discussion. Bonus marks will be given for full attendance (0.5 mark) and participation of the Q&A sessions (0.5 mark) in each of the two group presentation weeks (Weeks 14 and 15). Note: It is important that you do not eat in class during the lecture. However, you re free to take a short break to eat outside the classroom or go to the washroom at any time during the class. A2. Group Project and Presentation

3 Groupings and group size: Please form groups of between five and six students by yourselves and submit your group-member list to the TA by Feb 8 (Week 3). Project Topic: The objective of the project is to allow you to research into a particular area which is relevant to international financial market. You should choose a topic that you are keen to know more about, and delve into it. You can choose any topic in one of the three broad areas: (1) currency market (including currency crisis, currency trading, etc.), (2) equity market (including country analysis, equity trading, introduction of financial products, etc.), and (3) personal finance and investment (e.g., imagine you re an investment advisor and would like to recommend some investment strategies to your clients). To minimize the overlap of presentation materials across groups, no two groups can choose the same or similar topics. Project Proposal: Each group is required to submit a half-page project proposal to me via . The proposal should outline what you plan to do in the project. Your proposal will not be graded, but you need to have my approval of the proposal to start the project. The deadline for the submission is March 22 (Week 9). A penalty of 0.5 mark will be imposed each week for late submissions. Since no two groups can choose the same or similar topics, if you wish to secure your project topic, you can me your project title before you formally submit your project outline. Deliverables: Please provide me with a hard copy of the powerpoint slides (with 2 slides on each printed page) on the day of your presentation. Note: You do not need to submit any report other than the ppt slides. Presentation Each group is given 20 minutes for presentation plus 5 minutes for the discussion in class. Every student must take part in the presentation. Evaluation criteria You will be assessed along the following criteria: (a) Content & quality of research (including how interesting and insightful the topic and content are): 40% (b) Presentation (quality of the slides): 20% (c) Presentation (style, delivery, and management of the discussion session, including adherence to the 20-minute presentation time limit): 20% (d) Peer assessment: 20% For item (d) above, each group is to assess every other group, except their own. The assessment will be based on how useful the research is to you and the extent to which it has broadened your knowledge about the international financial markets. I am cognizant of the potential unfairness that could arise from such peer evaluations. Please be fair to your fellow classmates. The 2 extreme evaluation scores will be excluded from the calculation of your group average. A3 and A4: Examinations There will be a mid-term exam and a non-cumulative final exam. Both exams are closed-book and closed-notes exams and will focus on the materials covered in class. No make-up exams will be allowed without prior permission. I expect all of you to follow the school s examination policy. Among other things, you need to bring your own calculator(s) to the exams; you are not allowed to share calculator(s) with one another; you also need to silence your cellular phone and keep it away from the desk during the entire duration of the exams. COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE Week No. Topic Readings

4 1 (1/21) Foreign Exchange Market Foreign Exchange Quotations Cross-Rate Calculations Ch 6 2 (1/28) Foreign Exchange Market Bid-Ask Quotes Forward Exchange Rate Ch 6 3 (2/4) International Parity Conditions, the Balance of Payments, and Foreign Exchange Rate Determination Foreign Exchange Fundamentals Balance of Payment Transactions Purchasing Power Parity Covered Interest Rate Parity Ch 4, 7, 10 4 (2/11) The Lunar New Year 5 (2/18) International Parity Conditions, the Balance of Payments, and Foreign Exchange Rate Determination (Cont.) Uncovered Interest Rate Parity Covered Interest Arbitrage Uncovered Interest Arbitrage Carry Trades Ch 4, 7, 10 6 (2/25) Foreign Currency Derivatives. Interest Rate and Currency Swaps Currency Forwards Currency Futures Currency Options Ch 8, 9 7 (3/4) 8 (3/11) Mid-term Exam Mid-term Break 9 (3/18) Foreign Currency Derivatives. Interest Rate and Currency Swaps (Cont.) Interest Rate Swaps Currency Swaps Foreign Currency Speculation Ch 8, 9 10 (3/25) Transaction and Operating Exposure Measurement of Transaction Exposure Forward Market Hedge Money Market Hedge Option Market Hedge Ch 11, (4/1) Transaction and Operating Exposure Measuring the Impact of Operating Exposure Management of Operating Exposure Contractual Hedge and Balance Sheet Hedge Risk-Sharing Agreements Ch 11, 12

5 12 (4/8) International Portfolio Theory and Diversification Some Basics: Risk and Return Calculation Gains from International Diversification Optimal International Portfolio International Diversification with Emerging Market Stocks Ch (4/15) International Portfolio Theory and Diversification International Investment Vehicles Depositary Receipts Mutual Funds Closed-End Country Fund Exchange Traded Funds Ch (4/22) 15 (4/29) Project Presentation Project Presentation REQUIRED/RECOMMENDED READINGS & ONLINE MATERIALS (e.g. journals, textbooks, website addresses etc.) Required - Multinational Business Finance by David Eiteman, Arthur Stonehill, and Michael Moffett, 12 th Edition, Addison-Wesley Publishers, Call Number: HG Additional readings will be assigned. Students are expected to keep abreast of current developments in the Asia-Pacific region by reading leading business dailies/weeklies like the Asian Wall Street Journal, The Economist, Financial Times, Business Times and Business Week. MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE o conducting mid-term survey in additional to SETL around the end of the semester o Online response via Moodle site o Others: (please specify) COURSE POLICY (e.g. plagiarism, academic honesty, attendance, etc.) Students are responsible for honest completion and representation of their work. There will be zero tolerance for infractions, and I will apply the harshest penalties available. If you believe there has been an infraction by someone in the class, please bring it to my attention. ADDITIONAL COURSE INFORMATION (e.g. e-learning platforms & materials, penalty for late assignments, etc.)