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International Finance 2017/2018

  • 5 ECTS
  • Taught in Portuguese
  • Continuous Assessment

Objectives

The student must be able to: - Master the basic tools necessary to understand the functioning of the foreign exchange market ; - Know the instruments that could be used in the period covering the exchange rate risk and interest rates; - Understand and apply the different techniques and hedging of foreign exchange risks and interest rate through the use of hedging instruments ; - Understand the importance and rationale of diversification in a basket of currencies ; - Know how to analyze and evaluate the functioning of OTC contracts ; - Understand and know how to evaluate the different techniques of payment and receipt of international trade.

Recommended Prerequisites

Not applied

Teaching Metodology

The methodology is characterized by the coexistence of the exposition with the interactive models. The student will be encourage to have an active participation in classes. As a strategy for achieving the goals of curriculer unit, practical excercises will be promoted followed by their presentation in class. Students will be encouraged to develop an activity of permanent literature consult with the necessary guidance. Practical classes will encourage independence in cognitive analysis and problems solving.

Body of Work

1. Forex Exchange Markets 1.1. Description 1.2. Functions 1.3. Players 1.4. Concepts
2. Basic Concepts 2.1. Exchange rate 2.2. Currencies 2.3. Quotations 2.4. Diversity of quotations 2.5. The "spread" 2.6. Quote forms 2.7. Cross rates 2.8. Rate systems 2.9. Hybrid systems
3. Strategies: Arbitrage and Speculation 3.1. Arbitrage 3.2. Speculation
4. Characterization, role and functioning of the markets 4.1. view the foreign exchange market and the term 4.2. Contracts term interest rates
5. Foreign exchange risk and interest rate 5.1. Types of risk 5.2. Foreign exchange risk management, interest rate and exposure 5.3. Economic risk
6. Construction of a basket of currencies 6.1. Portfolio 6.2. Markowitz assumptions
7. OTC Contracts 7.1. Swaps 7.2. FRAs 7.3. Caps, Floors and Collars
8. Technics 8.1. Money transferences 8.2. Bank checks 8.3. Bills of exchange 8.4. Letters of credit

Recommended Bibliography

•Eun, C., Resnick, B. (2011), International Financial Management, New York: McGraw-Hill/Irwin, 6th edition.
•Eiteman, D., Stonehill, A., Moffet, M. (2006), Multinational Business Finance, Reading: Adisson-Wesley Publishing Company, 10th edition.
•Pinho, J., Soares, I. (2007): Finanças – Mercados e Instrumentos, Lisboa: Edições Sílabo.
•Silva, E.; Mota, C.; Queirós, M.; Pereira, A. (2013). Finanças e Gestão de Riscos Internacionais, Porto: Editora Vida Económica, 1ª Edição.

Complementary Bibliography

•Feenstra, R.; Taylor, A. (2012). International Economics, Worth Publishers, 2nd ed.,.
•Krugman, P.; Obstfeld, M.; Melitz, M.; (2012). International Economics: Theory and Policy, Pearson, 9th ed..

Weekly Planning

Week 1.
1. Forex Exchange Markets 1.1. Description 1.2. Functions 1.3. Players 1.4. Concepts
2. Basic Concepts 2.1. Exchange rate 2.2. Currencies 2.3. Quotations 2.4. Diversity of quotations 2.5. The "spread" 2.6. Quote forms 2.7. Cross rates

Week 2.
2.8. Rate systems 2.9. Hybrid systems

Week 3.
3. Strategies: Arbitrage and Speculation

Week 4.
4. Characterization, role and functioning of the markets

Week 5.
4.1. View of the foreign exchange market

Week 6.
4.2. Contracts of interest rates

Week 7.
5. Foreign exchange risk and interest rate

Week 8.
5.1. Types of risk 5.2. Foreign exchange risk management, interest rate and exposure
1st evaluation

Week 9.
5.3. Economic risk

Week 10.
6. Construction of a basket of currencies

Week 11.
6.1. Portfolio 6.2. Markowitz assumptions

Week 12.
7. OTC Contracts 7.1. Swaps

Week 13.
7.2. FRAs 7.3. Caps, Floors and Collars

Week 14.
8. Technics 8.1. Money transferences 8.2. Bank checks 8.3. Bills of exchange

Week 15.
8.4. Letters of credit
2nd evaluation

Demonstration of the syllabus coherence with the curricular unit's objectives

The contents are consistent with the objectives to be achieved. Thus, for the purposes of mastering the basic tools necessary to understand the functioning of the foreign exchange market, their instruments, and underlying concepts, the study of currency exchange and its basic concepts, as well as arbitrage and speculation strategies are complemented with the resolution of practical exercises. In order to understand and apply the different techniques of hedging of foreign exchange risks and interest rate risk, the characteristics, functions and operation of the spot and forward markets are presented creating different scenarios of decision making. For the purpose of understanding the importance of diversification in a basket of currencies the theory of Markowitz is presented.

Demonstration of the teaching methodologies coherence with the curricular unit's objectives

For all learning objectives it is used the lecture method with brainstorming and well-strutured expression of opinion. Through the use of an exposition methodology combined with an interactive model, students participation are encouraged to operationalize concepts and knowledge of the foreign exchange market and it´s main strategies. By encouraging students to develop an activity of ongoing research, the development of capabilities are promoted within the spot and forward markets, specially in technical aspects of spot rates and time restructuring debts/credits, foreign exchange and interest rates risk management techniques. Through brainstorming and problems solving, it is aimed to understand and analyze the construction of a basket of currencies, swaps and fra's operations as well as main techniques of payments within the international trade.

relevant generic skillimproved?assessed?
Achieving practical application of theoretical knowledgeYesYes
Analytical and synthetic skillsYesYes
Balanced decision makingYes 
Commitment to effectiveness  
Commitment to quality  
Ethical and responsible behaviour  
Event organization, planning and management  
Foreign language proficiencyYes 
Information and learning managementYes 
IT and technology proficiencyYes 
Leadership  
Problem Analysis and AssessmentYes 
Problem-solvingYesYes
Relating to others  
Research skillsYes 
Self-assessmentYes 
Teamwork  
Written and verbal communications skillsYesYes
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