International Financial Management

Syllabus

Thematic definition of lectures: 1. Global financial environment. International Financial Management - Overview. Management of international companies, management structure of international companies, the agency problems. Theory of comparative advantages. Market imperfections. Business methods in international trade. 2. International cash flows. Balance of Payments, its importance for exchange rate management. Current, financial and capital account of the Balance of Payments. Globalization and the growth of international trade. Factors affecting international cash flows. International capital flows. Factors influencing foreign investment decision, portfolio investment. 3. International financial markets, their history. Interest rates on the international money market. Money market securities risk. International credit market and syndicated credit. International bond market. Eurobond market and their risk. International stock market. Issue on shares in foreign financial markets. 4. Exchange rate and its determinants. Measuring exchange rate movements. Factors affecting the exchange rate. The impact of inflation, interest rates, revenues, government controls and investors' expectations on the exchange rate. Mutual relationship of individual factors. Impact of liquidity on the exchange rate. Cross exchange rate movements. 5. The effects of governments on the exchange rate. Exchange rate systems. Characteristics of a fixed system, a free-floating exchange rate, a controlled floating exchange rate, a tied exchange rate. Single European currency. Eurozone monetary policy 6. The relationship between inflation, interest rates and the exchange rate. Interpretation of purchasing power parity. Use of Purchasing Power Parity to estimate exchange rates. The International Fisher Effect, and the Consequences of the International Fisher Effect. International arbitration and Interest Rate Parity. Interest Rate Parity and its observance. Covered interest arbitration process. Comparing different types of arbitrage. 7. Exchange rate prediction and its significance for companies. Exchange rate prediction techniques. Technical analysis, its essence and limits. Fundamental prediction of exchange rates. Use of purchasing power parity for prediction. Limits of fundamental prediction. Market based prediction. Consequences of the international Fisher effect on the prediction of exchange rates. 8. Measuring the sensitivity of exchange rate fluctuations. Transaction exposure measurement. Measuring economic exposure. Accounting exposure measurement. Use of hedging instruments for controlled transaction exposure. Managing economic exposure through cash flow stability, reducing capital costs and risk. Management of accounting exposure through balance sheet heeding and futures contracts. 9. Cross-border mergers and acquisitions. Historical overview of the development of mergers and acquisitions in the USA, UK and EU. Forms of mergers and their characteristics. Motivation of international companies to carry out mergers and acquisitions-changes in the global environment, macro motivation and micro motivation. Two levels of the merger and acquisition process. Strategy and management. Financial analysis and strategy. 10. Foreign direct investment. Motives for foreign direct investment. International portfolio investment. The benefits of international diversification. Barriers to foreign direct investment. Measuring political risk. Three dimensions of political risk - micro-risks, macro-risks and global risks -. Ways of managing political risk at the enterprise, state and global economy levels. 11. International capital structure and cost of capital. Components of capital. Decision - making processes on capital structure in international companies. Subsidiaries versus parent company. International moods of capital. Cost of capital and their differences in individual countries. 12. Financing of international trade, payment methods in international trade, agencies for the facilitation of foreign trade. Export-import banks and their role in international trade. Private export companies. Foreign private investment companies. 13. International cash management. International working capital management. Costs and revenues of subsidiaries, dividend payments of subsidiaries, cash sorting. Centralized cash management, its benefits. Cash optimization, conversion cost minimization. Cash transfer management between subsidiaries. Thematic definition of exercises: 1. Determination of conditions for credit and exam. Solving examples and presentation of papers / seminar papers at each exercise. 2. International currency markets / exchange rate, cross rate (Calculation of exchange rate spread, selected currencies, calculation of forward exchange rate, calculation of discount and premium of selected currencies, calculation of cross exchange rate of selected currencies, calculation of income from currency arbitrage). 3. Measurement of the change in spot exchange rates (calculation of the percentage change in the exchange rate with direct and indirect quotation of currencies, calculation of the size of the percentage appreciation, or devaluation of selected currencies). 4. International parity conditions (calculation of exchange rate due to purchasing power parity, calculation of interest rate using Fisher effect, calculation of expected exchange rate, calculation of profit / loss of covered and uncovered arbitrage, calculation of forward exchange rate). 5. Transaction exposure / receivables management (hedging the change in the exchange rate through money market hedging, hedging on the futures market through selected instruments, hedging on the Option market through a call or put option). 6. Transaction exposure / liability management (hedging exchange rate changes through money market hedging, futures hedging through selected instruments, hedging on the options market through call or put options) 7. Economic exposure (Calculation of cash flow and net present value for various exchange rate alternatives and comparison of alternatives) 8. Accounting exposure (Calculation of translational profit or loss using the usual method and the temporal method, use of forward contracts to eliminate currency risk) 9. Interest rate exposure and interest rate risk (calculation of interest rate according to individual methods, calculation of forward interest rates, calculation of profit / loss of FRA contracts, use of swaps and OTC option contracts to mitigate risk) 10. International investment (calculation of currency yield of foreign change securities, calculation of total yield of foreign securities - shares, bonds, calculation of yield and risk of international portfolio). 11. Management of working capital (calculation of funds using / not using the central depository, calculation of mutual cash flows of multilateral netting, calculation of extended trade credit costs, 12. Securitization of assets (examples of the use of on-balance sheet and off-balance sheet securitization, examples of securitization with selected credit derivatives, swaps.). 13. Credit exam.