Course Objectives

This course is designed for senior-level undergraduates majoring in finance. The purpose of this course is to extend fundamentals of investment into a global context in a clear and practical way. After finishing this course, the students should be able to apply principles to analyzing fundamental value of an asset or portfolio, detecting mispriced assets, as well as predicting the likely impact that an event might impose to the market. Business publications like the Wall Street Journal and the Financial Times, as well as general-interest newspapers like the New York Times cover international financial news on a regular basis. Material from these financial media will be frequently used in the class. The students are supposed to be able to understand the likely causes and consequences of these events, it is necessary to possess a good knowledge of concepts like the nominal and real exchange rates, world market risk, hedge ratio, etc. We will review measurement, as we see what is captured by constructs like β coefficient, forward discount or premium and RTM. We will examine the facts revealed by the data, and discuss the main theories that economists have devised in order to explain the facts. The foundations learned in this course will give students a global view the economy. Equipped with the basics, students will find it easier to enrich and refine their views in the future as they continue to follow financial news and statements by policymakers.  

Course Requirements

Three quizzes. The 100-minute quizzes will be taken in class, on announced dates. Quizzes will be open book and open notes. Calculators will be allowed, but laptop computers will NOT be allowed, and the use of cellular phones, ipads and similar devices will NOT be allowed. Quizzes will not be cumulative. That is, the material tested in a quiz will be limited to the material covered since the previous quiz. ·

Three problem sets. Problem set due dates will depend on how quickly we cover the material, and thus, they will be announced in class as the course progresses. Problem sets will be scored out of a total of 100. Late submissions will be penalized as follows: If a problem set is due on a given class day, but a student does not turn it in by the end of class, i.e., by 02:00:00pm that day, the student will lose 15 points and the due date will be extended to the next class by 02:00:00pm. Failure to meet the second deadline will result in an additional 15 point penalty and a final extension of the deadline to the following class, again by 02:00:00pm. No submissions will be accepted after the third deadline. Thus, students who miss the third deadline will receive a score of zero for the assignment. To avoid late penalties, students who cannot attend class on a problem set due date must contact the instructor and submit their assignment before the deadline.   

Comprehensive final exam will be close-book.  

Course Contents

Four parts will be included in this course.

Part 1, Fundamentals on foreign exchange rates, providing the students with basic knowledge and skills in understanding foreign exchange markets.

Part 2, International asset pricing ,providing the students with theoretical as well as practical approaches to evaluate financial asset in a dynamic global market. We’ll focus on international CAMP, with an extra emphasis on no arbitrage condition.

Part 3, Investing in different assets, including global bond investing and equity investing. Differences in national markets will be taken into consideration together with the general principles and methods.

Part 4, Currency risk management, introducing main instruments to hedge currency risk, as well as some important hedges skills.

Credits: 3