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BU4640 Derivatives and International Finance

(15 ECT credits)

Lecturer

Dr Charles Larkin

Module Outline

Section 1: International Finance

  • Introduction to international finance, ownership and governance of the organisation
  • The international monetary system
  • The foreign exchange market and exchange rate determination
  • International parity conditions
  • Managing exchange rate exposure
  • Foreign direct investment and the global cost of capital
  • International diversification

Section 2: Introduction to Derivatives

  • Introduction
  • Forwards and Futures
  • Swaps
  • Options
  • Options Pricing
  • Options and the Greeks
  • Non-Standard Derivative

Learning Outcomes

Having completed this module, you should be able to:

  • Provide an understanding of derivatives and introduce the analytics of derivative valuation
  • Demonstrate how to value forward, futures, swaps and options
  • Describe and appraise how derivatives can be used to achieve various hedging and speculative strategies
  • Evaluate previous derivative mishaps and what we can learn from them
  • Demonstrate a good understanding of the international financial system, how the globalisation of the world economy is evolving and how firms need to react to these changes
  • Assess the current global business environment and design appropriate international financial management strategies
  • Understand how exchange rates work, the advantages and disadvantages of various currency systems, and the theory and evidence relating to exchange rate determination
  • Explain the mechanisms for managing foreign exchange rate exposure

Textbook and Readings

Derivatives
Hull, J. (2008), Fundamentals of Futures and Options Markets, Sixth Edition, Pearson Prentice Hall

International Finance
Eiteman, D.K., Stonehill, A.I., & Moffett, M.H. (2016) Multinational Business Finance, (14th ed. Global Edition). Pearson Education. ISBN: 9781292097879

Module Prerequisite

BU2550 Introduction to Finance

Assessment

Assessment for this course will be as follows:

1. Derivatives Trading Game (Individual) – 20%
2. International Finance Assignment Essay (Individual) – 20%
3. End of Year Final Examination (Individual) – 60%

Students unable to submit an assignment for medical reasons must produce a medical certificate to the course lecturer within three working days of the missed submission date. Certificates received after that time will not be accepted.