INTERNATIONAL FINANCIAL INSTITUTIONS AND MARKETS
Learning outcomes of the course unit
a) Knowledge and understanding of: the functioning of the foreign exchange market; the main problems related to the financial management of multinational firms; the role of microfinance in overcoming financial exclusion.
b) Ability to apply knowledge in order to: measure the exposure to foreign exchange risk; manage the transaction risk of international operations; identify the features of a microfinance intervention useful to overcome financial exclusion.
c) Ability to integrate knowledge and handle complexity, and formulate judgements with incomplete or limited information in order to: choose financial instruments appropriate for managing the risks of multinational operations; decide whether a microfinance intervention can be an effective solution to specific social and financial problems.
d) Students will have the ability to communicate their conclusions and the underpinning knowledge and rationale to financial operators as well as to non-specialist audiences using a proper technical language.
e) Since a problem solving approach will be adopted, together with the analysis of case studies, students will learn to study in a largely self-directed and autonomous manner.
Basic knowledge of financial mathematics.
Suggested reading: D. Luenberger, "Investment Science", Oxford University Press, 1998, Chapter 2 "The Basic Theory of Interest".
Course contents summary
The aim of the course is to analyse the functions of a financial system in providing services to multinational firms and the reasons why financial markets, in channelling funds to deficit units, can fail to serve low-income households and entrepreneurs.
The first part of the course focuses on the role of financial institutions and markets in providing financial services to multinational firms. The international financial environment is examined, with a particular focus on foreign exchange and Eurocurrency markets. The way multinational firms finance international trade, consolidate and manage their financial flows, and measure and manage exposures to currency risks are analysed as part of treasury management.
The second part of the course focuses on the failures of the mainstream financial system in channelling funds to low-income households and entrepreneurs. Starting from the problem of financial exclusion, the role of microfinance in economic and social development is examined. Microfinance service providers and their products are studied to understand how they allow people to save and invest in small businesses.
- Meaning and determinants of interest rates.
- Foreign exchange and Eurocurrency markets.
- Balance of payments.
- Financing the firm’s international trade.
- Managing the currency risk: transaction exposure.
- Managing the multinational firm’s cash flows.
- Financial exclusion.
- Role of microfinance in providing access to finance.
- Microfinance service providers.
- Microfinance products.
The reading material (textbook and readings) will be indicated during the course.
Lectures, exercises, and analysis of specific cases based on newspaper articles.
Assessment methods and criteria
Written exam. Knowledge and understanding, the ability to study in a largely autonomous manner, the ability to formulate judgements with incomplete data, and the ability to communicate conclusions will be assessed through 2 open-ended questions for up to 14 marks and 2 true or false questions (with argumentation) for up to 10 marks.
The application of knowledge and understanding through problem solving abilities in new or unfamiliar environments will be assessed through 1 or 2 exercises, for up to 6 marks.
During the exam devices such as smartphones, smartwatches, tablets, etc. are strictly forbidden.
The final grade is published on Esse3.
Oral exam, with three questions.
The questions assess the ability to study in a largely autonomous manner, the ability to formulate judgements with incomplete data, and the ability to communicate conclusions. At least one question is a numerical exercise assessing the application of knowledge and understanding through problem solving abilities in new or unfamiliar environments.
The final mark results from the overall performance.