BUSN3071 International Business Finance and Banking

This topic examines the financial issues facing firms and banks involved in the international transfer of assets, goods and services. The main topics explored will be the foreign exchange market, the management of foreign exchange risk, and investment and financing decisions in international capital markets.

This topic aims to provide an understanding of financial management in an international setting. At the outset we study the macro-environment in which the multinational firm operates. This encompasses an understanding of:

• The forces of globalization and its implications for the multinational firm
• The operation of the international financial system, its current state, challenges for the future
• Determination of exchange rates, and their relationship with interest rates and inflation
• Consequences of misalignment of exchange rates, the origins of financial crises

The second part of the topic addresses foreign exchange risk management challenges faced by firms operating in an international setting. Specifically, we examine:

• Different types of foreign exchange exposure faced by the MNC
• Identification and measurement of these risks
• Management of foreign exchange risk via initiatives on, as well as off the balance sheet. The use of derivative instruments will be considered in detail

The third part of the topic addresses financing issues and options faced by international banks:

• The structure of international financial markets and institutions, the range of instruments traded therein
• Innovations in international financing, the forces leading to these innovations, the role they play, the mechanisms facilitating trade in financial assets across national boundaries

1. Identify the characteristics of international capital and foreign exchange market
2. Identify and appraise investment opportunities in the international environment
3. Identify risk relating to exchange rate fluctuations and develop strategies to deal with them
4. Develop strategies to deal with other types of country risks associated with foreign operations
5. Evaluate alternative international trade finance options
6. Identify and analyse current issues in international banking