25421 - Subject Outline PDF

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SUBJECT OUTLINE 25421 International Financial Management Course area

UTS: Business

Delivery

Spring 2018; City

Credit points 6cp Requisite(s)

25557 Corporate Finance: Theory and Practice These requisites may not apply to students in certain courses. There are also course requisites for this subject. See access conditions.

Result type

Grade and marks

Subject coordinator Gerhard Van de Venter Email: [email protected] Phone: (02) 9514 7783 Office Location: Building 8, Level 7 Consultation Hours: Thursdays: 10am - 12pm

Teaching staff Christina Bui ( [email protected]) Wing Bui ( [email protected])

Subject description This subject introduces students to the concepts of international finance and the financial management of international businesses. Topics covered include foreign exchange, global financial markets, foreign exchange risk and its management, and financial decision-making techniques used by international business. Areas considered include trade finance, multinational working capital management, direct foreign investments and global financing.

Subject learning objectives (SLOs) Upon successful completion of this subject students should be able to: 1. discuss the role and practices of foreign exchange markets and their use in financial management by international businesses 2. explain the exchange rate determination and the role of global financial markets 3. appraise the financial risks faced by international businesses and the principles for managing these risks 4. apply the principal financial management techniques in international business.

Contribution to the development of graduate attributes The subject contributes to the aim of preparing students to commence a fulfilling and effective career in business, especially in finance professions. It pursues these aims through the study of the financial management aspects of international business and the international financial system. The subject draws knowledge of accounting, economics, finance, marketing and quantitative methods to provide students with a capability to undertake international finance case studies.

Teaching and learning strategies Lectures present and analyse essential principles are presented and practical applications and case studies are examined in tutorials. Appropriate use is made of Learning 2014 practices, such as the use of on-line and off-line learning opportunities and flipped learning. 15/07/2018 (Spring 2018)

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Content (topics) The operations of foreign exchange markets; General theories of exchange rates determination; Global financial system and its use by international business; Techniques and concepts used in international financial management; Analysis of risk exposures of international business; Risk management techniques and policies for international business.

Program Week/Session

Dates

Description

1

25 July

Topic 1: Introduction and Multinational Corporations Notes: This topic will give introduction of the subject overview and discuss the background and a few case studies of multinational corporations. Research online and examine how BMW Group manages foreign exchange rate exposures across the globe. Readings for BMW Group’s strategies are available on UTSOnline. Readings: Madura (2018) Chapter 1 Tutorials: In-class practice questions and the following homework questions: Ch1: 1, 6, 9 and case study on BMW Tutorials start in week 2

2

1 August

Topic 2: Foreign Exchange Markets Notes: This topic will introduce the characteristics and price quotation of foreign currency markets and explain the factors the determine exchange rates. Readings: Madura (2018), Chapter 3 and 4 Tutorials: In-class practice questions and the following homework questions: Ch3: 3, 4, 11, 24, 25; Ch4: 1, 15, 19, 20, 24, 26

3

8 August

Topic 3: International Financial Environment and Government Influence on the Exchange Rates Notes: This topic will explain the balance of payment and discuss various exchange rate systems and the impact of government intervention on exchange rate. Pre-learning: Before the class, please research online about the Asian Financial Crisis of 1997-98. Articles will be placed on UTS online. Please read them (and other relevant articles you can find on the internet) before the lecture. Readings: Madura (2018), Chapter 1, 2 and 6 Tutorials: In-class practice questions and the following homework questions: Ch1: 2, 3, 29; Ch2: 11, 12(a & b), 13(a & b); Ch6: 1, 3, 4, 6, 7, 18, 19, 20, 22

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4

15 August

Topic 4: Currency Derivatives Notes: This topic will introduce currency futures and option markets and their application in currency hedging practice. Readings: Madura (2018), Chapter 5 Tutorials: In-class practice questions and the following homework questions: Ch5: 4, 6, 7, 10, 11, 12, 13, 14, 18, 25, 41 The first (of 4) UTSOnline quizzes will be held this week covering Topics 1 and 2

5

22 August

Topic 5: International Arbitrage and Interest Rate Parity Notes: This topic will introduce the concepts and skills in currency arbitrage, including: locational arbitrage, triangle arbitrage and covered interest arbitrage. Readings: Madura (2018), Chapter 7 Tutorials: In-class practice questions and the following homework questions: Ch7: 1, 2, 4, 6, 21, 32, 41, 42, 43, 45

6

29 August

Topic 6: Parity Relationships and Forecasting Exchange Rates Notes: This topic will introduce a few parity theories that can explain exchange rate movements and discuss various forecasting approaches for exchange rate. Pre-learning: Please read the following article before class and be prepared to discuss it in class: “Carry trades and currency crashes” by Brunnermeier, Nagel and Pedersen. The article is available on UTSOnline. Readings: Madura (2018), Chapter 8 and 9: Tutorials: In-class practice questions and the following homework questions: Ch8: 24, 26, 32, 34, 42; Ch9: 11, 20, 27 The second (of 4) UTSOnline quizzes will be held this week covering topics 3 and 4

7

5 September

Topic 7: Measuring Exposure to Exchange Rate Fluctuations Notes: This topic will explain various currency risk exposures and the skills to manage transaction exposure. Readings: Madura (2018), Chapter 10 and 11 Tutorials: In-class practice questions and the following homework questions: Ch10: 2, 4, 7, 13, 15, 22, 36, 41; Ch 11: 2, 3, 9, 11, 16, 20, 21, 22, 32, 33

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8

12 September

Mid-Session StuVac week (Non-teaching week)

19 September

Topic 8: Managing Risk Exposure and Foreign Investment Notes: This topic will explain the skills to measure and manage economic exposure and the measurement and management of foreign investment. Pre-learning: Before the class, please research online about the aftermath, in the financial markets, of the Brexit vote in June 2016. Articles will be placed on UTSOnline. Please read them (and other relevant articles you can find on the internet) before the class. Readings: Madura (2018), Chapter 12 and 13 Tutorials: In-class practice questions and the following homework questions: Ch12: 1, 4, 11 The third (of 4) UTSOnline quizzes will be held this week covering topics 5 and 6

9

26 September

Case study week (no scheduled lecture because of the group case study) Notes: No tutorial

10

3 October

Topic 9: Multinational Capital Budgeting and Country Risk Notes: This topic will explain the concepts and skills for international capital budgeting and how to incorporate the country risk in the capital budgeting analysis. Readings: Madura (2018), Chapter 14, 16 and 17 Tutorials: In-class practice questions and the following homework questions: Ch14: 1, 20(a), 27(a & b), 30; Ch16: 1, 10, 23; Ch 17: 2, 5, 12, 28 The fourth (of 4) UTS online quizz will be held this week covering topics 7 and 8

11

10 October

Topic 10: Long-term and Short-term Financing Notes: This topic will explain the international financing costs and how to manage foreign currency risk using currency swap. Readings: Madura (2018), Chapter 18, 20 and 21 Tutorials: In-class practice questions and the following homework questions: Ch18: 6, 14, 18; Ch20: 4; Ch21: 3, 5, 13

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12

17 October

Final exam preparation Revision and review

Additional information Contribution to the course International Financial Management is an elective subject within the Finance and the International Business majors of the Bachelor of Business. Its role is to provide students with a general understanding of the financial management aspects of international business as well as the international financial system. The subject builds on learning outcomes from subjects in the areas of accounting, economics, finance, investment and quantitative methods to provide students with a capability to undertake 'real world' international finance case studies.

Contribution to Integrating Themes International Financial Management introduces students to financial aspects of international business and so is fundamentally involved with internationalisation. The assignment task is the main vehicle for students to develop their team-building and communication skills, their use of information technology such as spreadsheets as an enabling resource for financial analysis, and their understanding of the ethical conflicts that can arise in the world of international finance.

Assessment There are three (3) components of assessment: 1. regular blackboard online surveys and tests (with strict deadlines), 2. group work/ group assignment(s), 3. final exam, Students will be required to perform satisfactorily in ALL components of the subject. The blackboard online surveys and tests (component 1) are an essential and compulsory component of the course. It is designed to ensure continuous learning and enhance deep learning.

Assessment task 1: Quizzes (Individual) Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 Weight:

20%

Task:

There will be four blackboard UTSOnline quizzes / tests spread out during the course semester. Each quiz has five MCQs based on lectures and tutorials from two prior modules and each quiz lasts 30 minutes. The quizzes are not done in class time. The quizzes give students self-assessment opportunity to review the lecture materials and evaluate the understanding of the relevant business knowledge and concepts and solve problems with critical thinking and analytical skills. The quiz will be assessed based on the accuracy and correctness of answer.

Further Further information will be provided in UTSOnline. Students who do not attend one half of the total information: number of faculty based quizzes will have the weighting of that assessment added to the final examination conditional on the students submitting, receiving approval and complying with the requirements of special consideration in accordance with the UTS rules. If the composite mark for the final exam totals more than 50 percent, the UTS rules on borderline result (range of 45-49) shall apply whereby students will be allowed to undertake a supplementary final examination. Where a student completes and passes a supplementary examination, the maximum mark awarded for the subject will be 50 Pass.

Assessment task 2: Case Study (Group)

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Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 Weight:

25%

Task:

The case study requires students to work in groups to do research on recent movements in the foreign currency markets and apply their knowledge and essential principles in international financial management to implement successful trading strategies of foreign currencies based on real time exchange rates. This will provide students with an important collaborative learning experience to develop communication and interpersonal skills and encourage them to work together to apply their understanding of the relevant business knowledge and concept to analyze the currency markets movements. Students can also demonstrate their analytic skills and business practice oriented skills to develop and implement a successful trading strategy in the foreign currency markets. The assignment assures objectives 1-4. The case study will be assessed based on the communication clarity and presentation of the case study report and the successful applications of business knowledge in the analysis of foreign currency markets and in the implementation of currency market trading strategy.

Further Further information will be provided in UTSOnline. information:

Assessment task 3: Final Examination (Individual) Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 Weight:

55%

Task:

Examination serves to reinforce materials covered in the course. Students will be required to consider the impact of international finance on multinational firms and to demonstrate their understanding of the currency forecast and risk management techniques and global financing and investment policies. The final exam will help students enhance their understanding of business knowledge/concepts, demonstrate their critical thinking and apply the analytical skills through problem solving based on various scenarios that occur with multinational corporation’s investment, financing and risk management activities. The final examination will be held during the formal examination period at the end of the semester. The examination will cover all topics and material considered in class during the semester. The final examination will count 55% towards the overall course assessment and will be of two (2) hours duration with 10 minutes of reading time. The final exam will be assessed based on the accuracy and correctness of answer and demonstration of knowledge and analytical skills in the international financial management.

Minimum requirements Students must achieve at least 50% of the subject’s total marks.

Required texts Madura, J. (2018), International Financial Management, 13th edition, Cincinnati Ohio: Thomson South-Western College.

Recommended texts Bekaert,G., Hodrick, R.J. (2011), International Financial Management, Pearson Education 2nd edition

References UTS Business School Writing Guide (2018)

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Other resources The Economist, Financial Times, Wall Street Journal, The Australian Financial Review, (Academic) Journal articles

Academic liaison officer Dr Maria-Luise Ossimitz, Accounting Discipline Group, telephone 9514 3069 Mr Harry Tse, Economics Discipline Group, telephone 9514 7786 or 9514 5456 Mr Kristoffer Glover, Finance Discipline Group, telephone 9514 7778 Dr Paul Wang, Marketing Discipline Group, telephone 9514 3692 Associate Professor Carmel Foley, Management Discipline Group, telephone 9514 5102 Any arrangements should be negotiated within the first six weeks of session.

Support Student Services Unit/Counselling: Student Services provides a range of free and confidential professional services to support different aspects of your life and learning at UTS. These services include counselling for personal and learning problems or issues. If you are experiencing difficulties with your overall study program, for whatever reason, telephone +61 2 9514 1177 (City campus). Students with disabilities or ongoing medical conditions: If you are a student who has a disability or ongoing medical condition that requires support services you are encouraged to contact the accessibility consultants or Accesssibility Service (telephone +61 2 9514 1177) for a confidential interview. Supporting documentation regarding your disability or ongoing medical condition is required if you wish to apply for assessment adjustments, including alternative assessment conditions. Each faculty has appointed academic liaison officers (ALOs) who are responsible for approving assessment adjustments. Meeting with the accessibility consultants or Accessibility Service before seeking assessment adjustments from your ALO is required. Improve your academic and English language skills: Marks for all assessment tasks such as assignments and examinations are given not only for what you write but also for how you write. If you would like the opportunity to improve your academic and English language skills, make an appointment with the HELPS (Higher Education Language and Presentation Support) service in Student Services. HELPS (Higher Education Language and Presentation Support): HELPS provides assistance with English language proficiency and academic language. Students who need to develop their written and/or spoken English should make use of the free services offered by HELPS, including academic language workshops, vacation intensive courses, drop-in consultations, individual appointments and Conversations@UTS. HELPS is located in Student Services, Building 1 Level 5 Room 25 (CB01.05.25). Study skills / learning support: If you are experiencing difficulty with your studies or need to develop the necessary study skills you require for your course, there is a host of useful information and websites to help you on the UTS Business School, Study and Assessment Resource website. Links on how to write better, study more effectively, available support services/staff to help, how to complete assignments; as well as tips for successful study and online study skills resources can all be accessed. In addition, HELPS provides self-help resources. Special consideration: Special consideration consists of the exercise of academic discretion to provide equitable treatment to students whose performance in an assessment item is affected by illness, misadventure or work-related circumstances. You should only apply for special consideration when your performance in an assessment item, including examinations, has been affected by extenuating or special circumstances beyond your control. These circumstances include: Serious illness or psychological condition: such as hospital admission, serious injury or illness, severe anxiety or depression Loss or bereavement: such as death of a close family member, family relationship breakdown Hardship or trauma: such as being a victim of a crime, sudden loss of income or employment, severe disruption to domestic arrangements Exceptional employment demands: such as active service (e.g. ADF Reserves, bushfire and SES services). Special consideration is not automatically guaranteed and may not result in a mark adjustment Careers Service: The UTS Careers Service aims to actively support the career development needs of all UTS students.

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Statement about assessment procedures and advice Assessment of coursework subjects All staff and students involved in the assessment of coursework subjects at UTS are subject to the Policy for the Assessment of Coursework Subjects. The policy is applicable to the assessment of all coursework subjects. This policy does not apply to thesis subjects that are taken by students enrolled in rese...