Boston University Metropolitan College MET FI 763 D1 Multinational Finance and Trade Thursday 6-9 pm - Main Campus Room 201

SHA Office: Hours: Tuesday, Wednesday 1:00-13:30 PM Room 215 FLR 808 Commonwealth Ave. E-mail: araviv@bu.edu http://courseinfo.bu.edu/courses/08sprgmetfi763_d1/ Course Description Operating a business or investing on a multi-national basis presents many unique challenges. The primary objective of this course is to identify and examine these unique aspects and how these challenges can be addressed. These factors range from different sovereign jurisdictions, legal and regulatory environments, foreign exchange regimes and currency fluctuations, trade barriers, to language, business customs and distance. We will analyze these factors and the tools and mechanisms designed to manage or mitigate their effects. Similarities and differences between managing an operating business, foreign direct investment and international outsourcing will be distinguished from more passive portfolio investment. Course Objectives: We will commence the course by addressing sovereign and country risk, what consequences it poses for companies or investors operating in different sovereign jurisdictions and how these risks can be analyzed. We turn next to international financial flows and their impact on foreign exchange rates, another area distinguishing operations and investments in different countries. Given these risks, financial managers and investors focus significant attention on mitigation, through forward and futures markets, swaps, and use of derivatives. The class will focus on the basic mechanics of these instruments and how they can be utilized to hedge attendant risks. We will then move on to specific topics in multinational finance – distinctions in the financial instruments used in international finance, measurement and management of risk, especially through portfolio management, foreign direct investment, financing of international trade, and outsourcing, which is increasingly being used by companies in all commercial sectors. Basic Text: Alan Shapiro, Multinational Financial Management, 8th ed. Wiley, 2006 Spring 2008 Dr. Alon Raviv

1

Other References and Texts (Not Mandatory!): Bruno Solnik and Dennis McLeavey, International Investments, 5th ed. Addison Wesley, 2003 At their websites, the World Bank (International Bank for Reconstruction & Development) and its private-sector oriented cousin, the International Finance Corporation, the Organization for Economic Cooperation & Development (OECD), and the Bank for International Settlements have a bounty of useful data and analysis. CME Tutorial: http://www.cme.com/multimedia/tradefx/CME_FX/ Two highly readable and pertinent reviews of finance and risk taking are: Peter Bernstein, Against the Gods, The Remarkable Story of Risk, Wiley, 1998 Roger Lowenstein, When Genius Failed, The Rise and Fall of Long-Term Capital Management, Random House, 2001 Daily reading of the Financial Times and the Wall Street Journal are encouraged, as well as the weekly newsmagazines The Economist and The Far Eastern Economic Review. Others include Business Week and Fortune. Particularly the FT, the Economist and the Far Eastern Economic Review generally have a more international or global perspective than some more US-centric sources. Prerequisites: MET AC 630 MET FI 631 Information Sharing and Plagiarism One of the best ways to learn is by discussing and sharing ideas with others. This is especially true in many areas of business and finance where there are no simple, absolute “right” and “wrong” answers. Such discussion is strongly encouraged. However, unless it is clearly intended as a group project, any work submitted by you, whether in case studies, exams or papers, must be your own. Use of reference materials is essential, but direct use of any such material should be clearly cited. The University and the Department consider any form of cheating or plagiarism to be a serious offense and subject to severe penalty. The instructor considers it a capital offense. This course will strictly follow the Code of Academic Conduct of Boston University. Please keep this in mind. Academic conduct promoting the desired educational environment of the College involves behavior which refrains from cheating on exams, plagiarism, misrepresentation or falsification of data, theft or destruction of examinations or papers, or alteration, forgery, or knowing misuse of academic records or

2

documents or other similar behavior.α The internet has made plagiarism even easier, and be aware that text from the Internet is a bona fide form of plagiarism that could result in dismissal from Boston University.β This applies in any course at Boston University. Grading: Midterm Exam Final Exam Country Analysis Paper Quizzes, Case Studies & Problem Sets Class Participation 20% 40% 20% 10% 10%

Exams will generally consist of a combination of multiple choice and conceptual questions. The midterm exam will cover material addressed in the first half of the course. The final exam will be comprehensive, covering the entire contents of the course, though more weight will be placed on topics covered during the second half of the course. For all exams students may bring and use one 5x8 file card (half a sheet of paper) containing formulas, definitions, etc. of your discretion. All grading will be done on a curved basis. That is, individual grades for each exam, paper, etc. will be viewed relative to the mean and standard deviation of all the class’ grades for that particular assignment.

Class Participation Students are expected to attend and participate in the class. The essence of this course is learning a set of concepts and understanding how they apply in a variety of situations. Mastering the material requires you to assess, think, and form judgments, so high quality participation is essential. High-quality participation includes substantive contribution to class discussions, insights into topics we are discussing, questions regarding relevant topics, and on-line interactions with others. There is not much time to accomplish quite a bit so it is essential that you do not fall behind. Those that are not prepared can expect to be downgraded accordingly. Occasionally, illness, family or business obligations will prevent you from attending class. This is recognized and especially if you are ill, not attending may be best for your fellow students and instructor as well as you. Missing an individual class should not affect your grade. Nevertheless, if you are unable to attend a class, it is expected that you will fully familiarize yourself with the subject matter covered in that session. Make Up Examinations, Late Assignments and Extra Work

from Metropolitan College “Code of Academic Conduct” from Metropolitan College “Code of Academic Conduct”

3

Requests for a make-up exam will be handled on a case-by-case basis. Since written or presented material can be (and should be) done in advance there would be no situation that I can think of that would allow this material to be late. Please consider the date of the presentation and the paper to be the last date that this material can be presented not the day that it is to be presented. This will help you to make deadlines should unfortunate situations that arise at the last minutes. Requests for make up exams place an extra burden on both the student and the instructor and can be unfair to the other students who take the exams as scheduled. Thus you are strongly advised to avoid requesting a makeup exam. Infrequently, extreme situations arise that could make it essential to miss the exam. If these can be foreseen in advance, please talk to the instructor as soon as possible regarding rescheduling. This is done not to penalize any individual student but to attempt to assure that there is a level playing field and the total class feels confident that no one has a unique or unfair advantage. Extra Work does not represent a replacement for any assigned work or exam. Further, extra work cannot be offered to raise a grade since permitting this would be fundamentally unfair to all other students in the course. Sovereign Analysis Paper: Using what you’ve learned in the first section of the course, you’ll prepare a paper (not to exceed 10 pages, double spaced) analyzing a sovereign country of your choice. While the basic analysis will largely be the same, you’re asked to evaluate the country from three perspectives: How safe would it be to buy the bonds of the government? How safe would it be to buy securities (bonds or equities) of companies which primarily or exclusively do business in that country? How safe would it be to directly invest in a manufacturing plant in that country to either export the production or sell the output in the domestic market? It is strongly suggested that you pick something other than the most exotic country (to ensure that you can obtain sufficient information about the country to be able to analyze it) or the most prominent. These papers will be due at the beginning of the 9th session. The paper is to be prepared using the APA writing style and guideline for references format. This is for references at the end of the paper and the citation of author and dates in the body of the paper. The department uses the APA style as it lends itself well to both reading the paper and understanding references without being cumbersome as some of the other styles are (such as Chicago or MLA). You can down load the student style guide from the American Psychological Association (http://www.apastyle.org/elecref.html) web site or you can purchase the APA style guide from the book store. There is even a help disk that can be purchased for about $ 40 (http://www.apa.org/software/ ) that will work you through the process as you write you paper if you desire a more “personal assistance”.

4

Papers are to be RESEARCH PAPERS. Remember that work that you use from other authors MUST be referenced. Since it is assumed that you are not an authority on the topic that you are writing on it is expected that this paper is an overview of many different sources of information. These must be contributed to the author using the APA format. This is your paper and not the cut and paste of someone else's work. Keep in mind that the Boston University Library as well as your local, state and the national US Library of Congress have extensive on line services. USE THEM. The paper is to be submitted as both printed copy and as a disk. Remember you can turn in your paper ANY TIME before the last date and you are encouraged to do so. Scheduling The course is scheduled to meet every Wednesday, commencing January 16th. Course Outline: I. Introduction Course overview What is unique in multinational financial management? Assignment: Shapiro , Ch. 1 II. Sovereign Risk & Overview of FX Market 2,3 1/24, 1/31 Assignment: Shapiro, Ch 6, 7 Standard & Poor’s Criteria Paper & Sovereign Default History http://www.standardandpoors.com , then Credit Ratings; then Criteria & Definitions; then Sovereigns; then Criteria & Definitions III. International Financial Flows Balance of Payments, International Monetary Flows Assignment: Shapiro , Ch.3, 5 Exchange Rates Assignment: Shapiro , Ch.2, 4 Options, Swaps & Derivatives Assignment: Shapiro , Ch.8, 9 Mid-Term Exam 4 2/07 Session 1 Date 1/17

5

2/14

6

2/21

7

2/28

5

IV. International Capital Markets Assignment: Shapiro , Ch.12, 13, 14 Sovereign Analysis Papers Due at Beginning of Session 9 V. Portfolio Investment Investing in International Markets Assignment: Shapiro , Ch.15 Measuring & Managing Risk Assignment: Shapiro , Ch.10, 11 VI. Operating on a Multinational Platform Foreign Direct Investment Assignment: Shapiro , Ch. 16, 17 Financing Trade Assignment: Shapiro , Ch.18, 19 Review

8, 9

3/06, 3/20

10

3/27

11

4/03

12

4/10

13

4/17

14

4/24

Final Exam

15

6

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.