The course aims at providing the student with tools for the financial portfolio managing of companies operating in international markets. In particular the course will focus on: some basic concepts of the financial markets and specific features characterizing the international markets; some mathematical tools for capturing crucial relations among different financial instruments, with applications to risk hedging and to investments planning; some software tools for supporting the decision process. At the end of the course, the student should have to be aware of concepts which are fundamental for companies investing or seeking funding on international markets. For example she should have understood: the relationships between interest rates and exchange rates; the functioning of some derivatives on such rates; the types of risk inherent in domestic and foreign bonds and in the evaluation and management of an international company. Furthermore, the student should have to be able to apply principles and criteria, and to use mathematical and software tools for the assessment and the choice of financial opportunities.
1. Interest rates:
term structures of spot interest rates [Notes, Luendberger]
no arbitrage valuation [Notes]
forward rates [Notes]
interest rate swaps [Notes, Hull]
2. Currency risk:
value of a MNC [Madura]
exchange rates determinants [Madura, ch. 4]
currency derivatives [Madura, ch. 5, Notes]
forwards contracts and interest rate parity [Madura, ch. 5, Notes]
currency swaps [Hull, 6.1, 6.3, 6.4, 6.5, 6.6]
stock options and currency options [Madura]
exchange rates forecasting [Madura, ch. 9]
hedging currency risk examples [Madura ch 11]
USEFUL MATERIAL on the moodle page of the course: notes of the lessons, exercises
1) A good knowledge of the basic tools of the mathematical analysis and analytic geometry (limits / continuity / derivatives / integrals / plots, straight lines, slope, intercept),
ability to solve simple equations / inequalities
2) A good knowledge of the basic tools in statistics (random variables, probability distributions, expectation / moments).
3) A good working knowledge of basic financial mathematics (interest rate of a simple financial operation, internal rate of return, basis of an interest rate, equivalent rate in another basis, simple/compounded capitalization regimes, zero coupon bonds, coupon bonds, shares of a firm)
PREPARATORY COURSES: Mathematics, Financial Mathematics
SKILLS NECESSARY for successful learning: willingness and ability to conduct logical reasoning in a rigorous way, and to motivate each step and the conclusions
ORGANIZATION OF TEACHING ACTIVITIES: lessons, exercises
|Jeff Madura||International Financial Management (Edizione 12)||Cengage Learning||2013||978-1-133-94783-7|
|David, G., Luendberger||Investment science||Oxford University press||2nd edition|
|John C. Hull||Options, Futures, and Other Derivatives||Prentice Hall College Div|
|HULL J.||Opzioni, futures e altri derivati (Edizione 8)||Pearson Education Italia, Prentice Hall, Milano||2012||9788871927794|
The exam consists of a written test. Also an oral examination could be compulsory, in case the teacher needs for specific insights
The written test consists of practical exercises and theoretical questions, and can cover the whole programme of the course. Using notes or books or similar material during the test is forbidden
The exam is not passed if the mark in the written test is less than 18/30.
In case of oral exam, the final exam mark is awarded considering mainly the outcome of the written test.
The mark may become insufficient if inconsistencies are found with what is written. The mark score may increase only if parts of exercises have not been evaluated for doubt of interpretation. Requests for further questions to increase the score are not accepted. The necessity of further questions will be only established by the teacher.
Characteristics of the expected performance. The student is required to demonstrate a critical and in-depth knowledge of the topics covered in the course. The concepts must not be exposed mechanically but in a reasoned way, the student is expected to be able to recognize when the use of a formula obtained for a basic case is not appropriate, connections among different parts of the program may be required and advanced level exercises (marginally) can be proposed.
The concise but comprehensive exposure, the rigor, the direct pointing towards the core of the matter will be particularly appreciated. Vague, inaccurate, poorly justified or incorrect answers will be penalized
Students not attending the lectures: the examination methods are not differentiated between attending and non-attending students
The next exams (21-1-2021 and 8-2-2021) will be in the form of a quiz on the web: 4-5 exercises, exactly as for a usual written exam.
For further details about the exam see the forum at the moodle page