Hong Kong University of Science and Technology School of Business and Management FINA 3404: International Finance Fall 2015 Instructor: Ekkachai Saenyasiri, PhD, CFA Office: Room 5083, LSK Bldg E-mail: Esaenyasiri@ust.hk Phone: 2358 7663 Office hours: by appointment Lectures L1: Mo 3:00 PM 4:20 PM and Fr 10:30 AM - 11:50 AM, Room 1033, LSK Bldg L2: Mo 1:30 PM 2:50 PM and Fr 9:00 AM - 10:20 AM, Room 1033, LSK Bldg TA: Man Chung Mandy SO E-mail: mandyso@ust.hk Office: Room 5068, LSK Bldg Office hours: Thur 2:00 pm - 3:00 pm, or by appointment Tutorial sessions: Mon 10:00 am 11:00 am, Room G001, CYT Building OR Thur 4:00 pm 5:00 pm, Room 1511, Academic Building Note that we have tutorial sessions in only some weeks. Please check the schedule in details from the file posted on CANVAS Course website https://canvas.ust.hk Course Description An introduction to the fundamental principles of international financial management and investment. Topics include: international financial markets and instruments; foreign exchange markets; foreign currency derivatives and currency risk; international capital budgeting; international bond and equity markets. This course provides students with an introduction to the financial concepts and techniques that help multinational corporations run its operations in more than one country. The first part will look at the international financial environment and examine the institutional, theoretical, and empirical factors influencing exchange rates. The second part will cover how futures, options, and swaps can be used to reduce financial risk. Then we will cover the basics of transaction exposure management, cross-border capital budgeting, international capital markets, international portfolio diversification, and the effect of taxes on multinational corporate strategy. Prerequisites: FINA 3104 Investment Analysis and Portfolio Management Intended Learning Outcomes On successful completion of this course, students are expected to be able to: Demonstrate an understanding of international dimensions of financial markets such as international monetary system, international capital markets, regulations, risk, accounting, taxation and investor behavior. 1
Apply finance concepts and theories to analyze situations and make business decisions in international settings. Apply economic theories to discuss the determinants and behaviors of exchange rates Discuss how to use derivatives such as futures, options and swaps to manage risks faced by multinational corporations Discuss the basics of international portfolio management and the association between risk and return of individual assets and investment portfolios. Identify, describe and explain recent developments related to financial markets outside Hong Kong. Required textbook International Finance, 7/e Global Edition, by Eun and Resnick, McGraw Hill, ISBN 0077161610. This book is required of all students since it will be used extensively in the course. You should also read the assigned chapters in the textbook thoroughly because the lectures will only focus on the core and more difficult concepts instead of every detail in the textbook. Calculator Student must bring a calculator to class. On the exam day, all students must clear calculator memory before entering the exam room. Taking notes in the calculator is not allowed and will be treated as cheating. TA Tutorial hours There are two tutorial sessions in each week. These sessions are optional and cover the same content each week. In each session, TA will answer any question that students may have and will explain selected concepts from the topics covered in the lectures. TA may also work on additional examples and exercises. It is important for you to attend these sessions if you need extra help in this course. Our TA is also available to meet you during his office hours and/or by appointment. Course website: https://canvas.ust.hk You should visit the website regularly because a lot of important information will be available on the course website including Announcements, Syllabus, Lecture Notes (under Files), and Grades. Assignment and Grading Class participation 3% Group project 10% Assignments 15% Midterm Exam (Oct 22, 6:30 pm 9:00 pm) 32% Final Exam 40% Total 100% 2
Assignments There will be 3 assignments, 5 points each All assignments should be completed by a team of 3 students from the same section. These same team members must also work together on the Group Project You must submit the names (together with English name) of your team members to the TA by September 17, 10:00 am. If you do not have a team by then, I will assign a team for you, by ID number in ascending order Changing team is not allowed. Each team should submit only one file/hardcopy for each assignment At the end of the semester, I will let the team members to evaluate each other performance. Your final score may be adjusted up/down depending on the results of the peer evaluations. The TA and I will not answer questions regarding the assigned problems before the assignments are due. Group Project The purpose of this group project is to let students learn to do research on current financial developments outside Hong Kong. Please see instructions on CANVAS Examinations There will be two 2.5 hour examinations in this course: a midterm exam and a final exam. The midterm exam will be on October 22 nd (Thursday) from 6:30 pm to 9:00 pm. If there is any schedule conflict with the midterm exam due to extenuating circumstances, you must notify me by September 15 th. The format of the exams will be multiple choices and short-answer questions. Questions are designed to test your understanding of core finance concepts and principles as well as your ability to solve numerical problems using the core principles and techniques. All examinations are closed book exams. There will be no alternative arrangement for the midterm exam. If you miss the midterm exam, the weight of the final exam will be adjusted to 60 points. This also means that at most you can get 88 points out of 100 points from this course. You also have to submit a letter explaining the reason of your absence. Absence from the final exam will be excused only under special circumstances described in the University Regulations. These cases must be substantiated by the appropriate documentation submitted to ARRO within one week of the final exam. Cheating will not be tolerated. If you are caught cheating during the exams, at minimum you will receive zero credit and will face further disciplinary action. 3
Attendance and Participation You are strongly recommended to regularly attend the lectures for two main reasons. First, lecture notes only contain brief outlines and do not include detailed explanation of the concepts nor step by step solutions to numerical examples. So simply reading the lecture notes may not enable you to fully understand the concepts. Skipping classes will definitely hurt your performance because the assignments and exam questions are heavily based on materials covered in class. Second, class participation is important for your learning experience and highly encouraged. It helps you to think actively rather than passively, keeps you involved and motivated rather than removed and disinterested. Class Conduct To foster the best learning environment, you should abide by the following codes of conduct: Punctuality You are expected to arrive and leave the class venue on time as late arrival and early departure are rude and will be very disruptive to the class. If you need to come in late or leave early for various reasons, please do so quietly and sit in the rows closest to the exit of the classroom. Consideration Do not use electronic devices for entertainment or communication with others. Do not talk with other students or create disturbances in the lectures. Academic Integrity Academic integrity and honesty are critical values in upholding HKUST's reputation as a community of scholars and its claim to the "intellectual property" created by staff and students. As a student of HKUST, you must commit to the Academic Honor Code. Cheating will not be tolerated. If you are caught cheating during the exams, at minimum you will receive zero credit and will face further disciplinary action. How to succeed in FINA 3404 Read assigned textbook chapter prior to each class Attend classes and take notes Practice end-of-chapter problems Ask when you do not understand and attend the TA sessions Spend at least 6 to 9 hours per week studying outside classroom 4
Tentative Course Schedule for L1 & L2 Topic Approximate dates Chapter 1: Globalization and the Multinational Firm Sept 4 Chapter 5: The Market for Foreign Exchange Sept 7 Chapter 6: International Parity Relationships Sept 11, 14, 18 Chapter 7: Futures and Options on Foreign Exchange Sept 21, 25, Oct 2 Chapter 14: Interest Rate and Currency Swaps Oct 5, 9 Chapter 8: Management of Transaction Exposure Oct 12, 16 No class on Oct 19 Midterm Exam : Chapter 1, 5, 6, 7, 8 and 14 Oct 22 (Thur 6:30 9:00 pm) Chapter 2: The International Monetary System Oct 23 Chapter 3: Balance of Payments Oct 26, 30 Chapter 12: International Bond Markets Nov 2 Chapter 13: International Equity Markets Nov 6 Chapter 15: International Portfolio Investment Nov 9, 13 Lecture Note on International Capital Budgeting Nov 16 Chapter 19: Multinational Cash Management Nov 20 Chapter 21: International Tax Environment Nov 23 Group Presentation Nov 27 Group Presentation & Review Nov 30 Final Exam: Chapter 2, 3, 12, 13, 15, Lecture Note on International Capital Budgeting, 19, 21 TBA Instructor reserves the right to make changes to this syllabus as needed 5