Economics and Finance(English)
Bachelor	TR-NQF-HE: Level 6	QF-EHEA: First Cycle	EQF-LLL: Level 6

General course introduction information

Course Code:

FNCE410

Course Name:

International Financial Management

Course Semester:

Spring

Course Credits:

Theoretical	Practical	Credit	ECTS
3	0	3	6

Language of instruction:

Course Requisites:

Does the Course Require Work Experience?:

Type of course:

Department Elective

Course Level:

Bachelor

TR-NQF-HE:6. Master`s Degree

QF-EHEA:First Cycle

EQF-LLL:6. Master`s Degree

Mode of Delivery:

Face to face

Course Coordinator :

Prof. Dr. GÖKÇE TUNÇ

Course Lecturer(s):

Course Assistants:

Course Objective and Content

Course Objectives:

The main objective of this course is to introduce the topics of futures and options on foreign exchange; foreign currency speculation; basic option pricing relationships and valuation; currency and interest rate swaps; management of interest rate and foreign currency risks; management of transaction exposure; management of operating exposure; management of translation exposure; international portfolio theory and diversification; foreign direct investment theory and political risk.

Course Content:

Futures and options on foreign exchange; foreign currency speculation; basic option pricing relationships and valuation; currency and interest rate swaps; management of interest rate and foreign currency risks; management of transaction exposure; management of operating exposure; management of translation exposure; international portfolio theory and diversification; foreign direct investment theory and political risk.

Learning Outcomes

The students who have succeeded in this course;

Learning Outcomes

1 - Knowledge
Theoretical - Conceptual
1) • Explain how currency futures, forwards and options contracts can be used to manage currency risk and to speculate on future currency movements
2 - Skills
Cognitive - Practical
3 - Competences
Communication and Social Competence
Learning Competence
Field Specific Competence
1) • Describe currency and interest rate swaps and explain how they can be used to reduce financing costs and risk
2) • Describe and distinguish among alternative derivative instruments, including the different types of exposures multinational corporations face when using derivative instruments.
3) • Discuss potential benefits from international diversification that are available to national investors
Competence to Work Independently and Take Responsibility

Lesson Plan

Week	Subject	Related Preparation
1)	• Define the course • Describe what multinational corporation (MNC) is • Describe the factors that influence business ethics for MNCs • Define exchange rate risk • Explain the difference between speculation, hedging and arbitrage • Syllabus. • Discuss Library Orientation Course, Instructor to verify completion • Definition of exchange rate risk • Discuss why business ethics and social responsibility is important for MNCs • Definition and comparison of speculation, hedging and arbitrage
2)	• Discuss exchange-traded currency futures contracts, options contracts, and options on currency futures • Explain what currency futures and options contracts are • Describe the organization of the markets in which derivative contracts are traded • Distinguish between currency futures and forward contracts • Describe advantages and disadvantages of futures contracts relative to forward contracts • Futures Contracts: Some Preliminaries • Currency Futures Markets • Currency Futures Contract Specifications • Foreign Currency Futures versus Forward Contracts • Basic Currency Futures Relationships	Review the Syllabus. Complete the Library Orientation Course. Instructor to verify completion. Read in Eitemen et. al. (2013) chapter 1 on pages 21-47
3)	• Distinguish between currency futures and options contracts • Explain how currency futures and options contracts can be used to manage currency risk and to speculate on future currency movements • Identify the basic factors that determine the value of a currency option • Read and interpret the prices of currency futures and options contracts • Options Contracts: Some Preliminaries • Currency Options Markets • Currency option Quotations and Prices • Foreign Currency Speculation • Option Pricing and Valuation	Read in Eitemen et. al. (2013) chapter 8 on pages 250-258 and be prepared to discuss in class. Solve problem 1 and 5 on page 260-261 and submit the solutions on Nov. 17th ,2015.
4)	• Describe currency and interest rate swaps and explain how they can be used to reduce financing costs and risks • Distinguish between interest rate and currency swap • Define interest rate risk • Calculate the appropriate payments and receipts associated with a given interest rate or currency swap • Types of swaps • Size of the swap market • Swap market quotations • Interest Rate Risk • Management of Interest Rate Risk	Read the case study at the end of the chapters and answer the questions, be prepared to discuss in class. Read in Eitemen et. al. (2013) chapter 8 on pages 250-258 and be prepared to discuss in class. Preparation for the quiz Solve problem 6 from Eitemen et. al. (2013) on page 261 and submit the solutions on Nov. 24th ,2015
5)	• Identify variations • Identify the factors that underlie the economic benefits of swaps • Describe the use of refinancing, forward rate agreements, interest rate futures and interest rate swaps • Variations of basic interest rate and currency swaps • Risks of interest rate and currency swaps	Read in Eitemen et. al. (2013) chapter 10 on pages 297-312 and be prepared to discuss in class.
6)	• Identify types of foreign exchange exposure • Identify the basic factors that determine the foreign exchange risk faced by a particular company • Discuss various methods available for the management of transaction exposure facing multinational firms such as forward market hedge, money market hedge and options market hedge. • Explain how a forward market hedge works • Explain how a money market hedge works • Define measurement of transaction exposure • Explain how forward market, money market and options market hedge work • Three Types of Exposure • Forward Market Hedge • Money Market Hedge • Options Market Hedge	Read in Eitemen et. al. (2013) chapter 10 on pages 297-312 and be prepared to discuss in class. Solve problem 17 from Eitemen et. al. (2013) on page 263 and submit the solutions on Dec. 1st ,2015
7)	• Currency Futures Markets • Currency Futures Contract Specifications • Foreign Currency Futures versus Forward Contracts • Currency Options Markets • Currency option Quotations and Prices • Foreign Currency Speculation • Option Pricing and Valuation • Types of swaps • Size of the swap market • Swap market quotations • Interest Rate Risk • Management of Interest Rate Risk • Three Types of Exposure • Forward Market Hedge • Money Market Hedge • Options Market Hedge	Read in Eitemen et. al. (2013) chapter 12 on pages 348-365 and be prepared to discuss in class. Read the case study at the end of the chapters and answer the questions, be prepared to discuss in class
8)	• Describe how currency risk-sharing arrangements work • Describe the costs associated with using the different hedging techniques • Currency risk-sharing agreements • Hedging Foreign Currency Payables and receivables	Read in Eitemen et. al. (2013) chapter 8 on pages 238-250 and be prepared to discuss in class.
9)	• Define operating exposure and distinguish between it and transaction exposure • Calculate operating exposure given a particular exchange rate change and specific cost and revenue scenarios • How to measure operating exposure • Illustration of operating exposure	Read in Eitemen et. al. (2013) chapter 11 on pages 331-341 and be prepared to discuss in class. Read the case study at the end of the chapters and answer the questions, be prepared to discuss in class. Solve problem 4 and 5 from Eitemen et. al. (2013) on page 369 and submit the solutions on Dec. 15th ,2015
10)	• Describe the marketing, production, and financial strategies that are appropriate for coping with the economic consequences of exchange-rate changes • Determinants of operating exposure • Managing operating exposure	Read in Eitemen et. al. (2013) chapter 11 on pages 331-341 and be prepared to discuss in class.
11)	• Define translation exposure • Describe the four principal currency translation methods available • Calculate translation exposure using different methods • Identify the basic hedging strategy and techniques used by firms to manage their currency translation risks. • Alternative Currency Translation Methods • Current/Noncurrent Method • Monetary/Nonmonetary Method	Read in Eitemen et. al. (2013) chapter 13 on pages 342-361 and be prepared to discuss in class
12)	• Calculate translation exposure using different methods • Identify the basic hedging strategy and techniques used by firms to manage their currency translation risks. • Temporal Method • Current Rate Method Designing a Hedging Strategy	Read the case study at the end of the chapters and answer the questions
13)	• Discuss potential benefits from international diversification that are available to national investors • International correlation structure and risk diversification • Optimal international portfolio selection • Effects of changes in exchange rates • International diversification	Read in Eitemen et. al. (2013) chapter 16

Sources

Course Notes / Textbooks:	David K. Eitemen, Arthur I. Stonehill and Michael H. Moffett, Pearson, 13th Edition, 2013
References:	David K. Eitemen, Arthur I. Stonehill and Michael H. Moffett, Pearson, 13th Edition, 2013

Course-Program Learning Outcome Relationship

Learning Outcomes	1	2	3	4
Program Outcomes
1) Explain the advances in the area of economics and finance within the framework of scientific methodology, theories and models.
2) Employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.
3) Explain the evolution of financial markets and institutions in a historical context and define how they operate.
4) Recognise the basic principles and regulations in the financial sector.
5) Discover and create entrepreneurial opportunities to successfully establish and develop their own ventures.
6) Recognise, interpret and discuss the current economic issues both at the national and global levels.
7) Have the English proficiency in following and interpreting the developments in the areas of economics and finance and in conducting written and oral communication.
8) Express the role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.
9) Identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.

Course - Learning Outcome Relationship

No Effect	1 Lowest	2 Low	3 Average	4 High	5 Highest

	Program Outcomes	Level of Contribution
1)	Explain the advances in the area of economics and finance within the framework of scientific methodology, theories and models.	4
2)	Employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.	4
3)	Explain the evolution of financial markets and institutions in a historical context and define how they operate.	5
4)	Recognise the basic principles and regulations in the financial sector.	5
5)	Discover and create entrepreneurial opportunities to successfully establish and develop their own ventures.	4
6)	Recognise, interpret and discuss the current economic issues both at the national and global levels.	4
7)	Have the English proficiency in following and interpreting the developments in the areas of economics and finance and in conducting written and oral communication.	3
8)	Express the role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.	5
9)	Identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.	2

Learning Activity and Teaching Methods

Individual study and homework
Lesson
Homework
Project preparation

Assessment & Grading Methods and Criteria

Written Exam (Open-ended questions, multiple choice, true-false, matching, fill in the blanks, sequencing)
Homework
Observation
Presentation

Assessment & Grading

Semester Requirements	Number of Activities	Level of Contribution
Attendance	4	% 10
Quizzes	3	% 15
Homework Assignments	9	% 15
Midterms	1	% 30
Final	1	% 30
total		% 100
PERCENTAGE OF SEMESTER WORK		% 70
PERCENTAGE OF FINAL WORK		% 30
total		% 100

Workload and ECTS Credit Grading

Activities	Number of Activities	Workload
Course Hours	16	48
Study Hours Out of Class	16	80
Project	1	12
Homework Assignments	4	12
Quizzes	2	1
Midterms	1	15
Final	1	22
Total Workload		190