429Syl_S08 - APPLIED ECONOMICS AND MANAGEMENT Cornell...

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APPLIED ECONOMICS AND MANAGEMENT Cornell University Spring 2008 AEM429 International Finance Tuesday/Thursday 2.55 – 4.10pm Warren 201 Instructor: Professor David Ng, Ph.D. Email: DTN4@cornell.edu Office hours : Ng (Tuesday 1-2 pm, Thursday 4.30 – 5.30pm) Warren 252 Teaching Assistant: Qian Han, Ph.D. candidate Email: Hanqian@gmail.com TA Section Time: Monday 7.30-8.30pm, Warren 231 Office Hours: TBA Warren 49 Administrative Assistant: Nancy Trencansky, 102 Warren Hall Email: NJT1@cornell.edu Website: http://blackboard.cornell.edu ==> search for arme429 Please read the syllabus carefully since it presents the philosophy of the course, provides a broad outline of the issues, and discusses course requirements. Note that you are responsible for reading and understanding all course requirements. What do you learn through this course? The purpose of this course is to understand the risks and returns in international investing. The course is divided into 4 units. A) Understanding Foreign Exchange and Other Risks in International Investments B) Benefits of international investment C) Hedging Exchange Rate Risk D) Valuation of International Companies Given the Risk After each unit, you should know the answers to the following questions. A) What are the sources of risks in international investment? How is exchange rate determined? How is exchange rate linked to interest rate and inflation in the two countries? What happens in an exchange rate crisis? B) Given the risks in international investment, why buy foreign securities? What does portfolio theory recommend about investing? Why is there an international diversification benefit? C) What are the instruments available to hedge exchange rate movement?
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How are instruments like currency futures, options and swaps priced? What kinds of exchange rate exposure do companies have? How does companies hedge their exposures? D) How does one value a company? How does one value a company with foreign cash flows? How does one value an emerging market company with country risk? This course is both theoretical and practical; the theory is presented so as to provide a framework to analyze and understand practical investment and corporate financial situations. There will be problem sets, mini-cases and examples so as to apply the theory learned. At the end of the course, you will be asked to pitch an investment on a country or an international company to the class. You will also solve a case on investing in an emerging market company. What doesn’t this course teach you? International finance is a very broad area. It is helpful to distinguish this course from other courses that may have the same title. This course is primarily a finance course that extends the insights gained from previous finance coursework to a global environment. The major issues that will be discussed include some basic background on exchange rate
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This note was uploaded on 05/23/2008 for the course AEM 4290 taught by Professor Ng,d. during the Spring '08 term at Cornell University (Engineering School).

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429Syl_S08 - APPLIED ECONOMICS AND MANAGEMENT Cornell...

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