International Finance: micro and macro aspects

Bachelor 2022/2023

Type: Compulsory course (World Economy)

Area of studies: Economics

Where: Faculty of World Economy and International Affairs

When: 2 year, 3, 4 module

Mode of studies: offline

Open to: students of one campus

Instructors: Головченко Ангелина Николаевна, Ksenia Bondarenko, Eduard P. Dzhagityan, Oscar Mukhametov, Anastasia Podrugina

Language: English

ECTS credits: 4

Contact hours: 104

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Abstract

The first part of the course will focus on microeconomic foundations of international financial relations: basic elements of the corporate finance, main financial markets and instruments, the principles of their functioning and their role. Both theoretical framework and modern practices will be considered in the course. The second part of the course will focus on macroeconomic aspects of international finance, including the contemporary issues of financial globalization, the evolution of international monetary systems, and institutional structure of international finance. The macro-aspects will also cover the balance of payments together with the specifics of international trade finance, international foreign exchange, credit, and securities markets as well as risks in international finance and how to mitigate them.

Learning Objectives

The aim of the Program is that students will acquire essential knowledge in, and understand key specifics of, the micro- and macro-aspects of international finance in the contemporary economic environment. Successful completion of the Program will enable students to grasp the insights of the fundamentals and complex mechanism of international finance, be in the know of the main instruments, critical trends, and risks in international finance, as well as allow them to confidently apply and integrate the gained skills in their further studies, including the advanced disciplines on economic and finance, and to make them prepared for professional problem-solving in the international finance area while in their workplaces.

Expected Learning Outcomes

Able to understand the critical role of financial intermediaries and distinguish among among various types of banks. Able to understand the difference between banks and non-bank financial institutions.
Able to understand core principles, issues, and challenges of the contemporary international finance, including the processes of financial globalization, regionalization, and “glocalization” as well as how international financial area is affected by crises and how it is recovered after the crises.
Know the specifics of international foreign exchange, credit, and securities markets, including their structure, instruments, and participants. Know the specifics of international gold markets.
Able to differentiate among various categories of world currencies; understand the reserve currencies; know the specifics of monetary policy and the process of regionalization and integration of international monetary system; and what is the monetary policy trilemma.
Know the specifics of the balance of payments’ structure, the purpose of its accounts, and how they are offset in case of the positive or negative balance of the Balance of Payments.
Understand the specifics and differences among the trade finance instruments, as well as the risks associated with international trade finance transactions.
Understand the specifics of forms and types of international credit; recognize the main differences between international loan syndication and international project finance; know the advantages of international leasing, factoring, and forfaiting for the financial market participants and the development of international trade.
Understand the functions and operational specifics of international financial institutions; able to differentiate between global and regional financial institutions.
Able to understand sources and various types of risks in international finance; risk transmission channels; how risks affect international financial markets and financial stability; and how risks are mitigated.
Able to understand the role and place of Russia in international finance; the specifics of the Balance of Payments of the Russian Federation; the Bank of Russia’s foreign exchange policy; participation of Russia in the international financial organizations; and how Russian financial policy affects the integration process in the EAEU financial markets.
Describe financial markets and financial markets participants, interpret their functions. Explain the efficient financial market hypothesis.
Explain the concept of discounting. Apply DCF formula. Calculate Net Present Value (NPV). Explain concept of arbitrage. Define annuity, perpetuity. Apply annuity, perpetuity formulas.
Describe effective annual rate (EAR), annual percentage rate (APR). Discuss differences between EAR and APR. Apply formulas for EAR and APR. Define real interest rate, calculate real interest rate. Discuss term structure of interest rates.
List investment criteria. Define and calculate NPV, IRR, PI, PP, DPP; interpret the results.
Define risk and uncertainty. List main micro-level risks (commercial, market, operational risks), describe them. Explain decision making under uncertainty. Describe diversifiable (idiosyncratic) and non-diversifiable (systematic) risks. Explain risk and return tradeoff.
Define bond and other types of debt. List potential debt issuers. Define purposes of issuing debt. Describe features eurobonds. Describe the bond issuing process. Discuss background of debt markets. Define credit risk, discuss credit risk measurement.
Define shares (stock). List share issuers and their potential purposes. Discuss background of securities markets. Explain IPO process. Discuss dividend policy of the company.
Discuss stock valuation. Apply dividend discounting model. Describe financial multipliers, apply them for stock valuation. Discuss bond valuation. Calculate bond fair price. Define yield to maturity. Calculate yield to maturity.
Describe foreign exchange market and its purposes. List participants of the foreign exchange market. List and describe main instruments of the foreign exchange market. Explain hedging.
Describe investment funds, pension funds and their functions. Describe fintech companies and their functions. Define cryptocurrency, discuss its perspectives.
Define exchange rate, list and discuss its determining factors. Explain different exchange rates regimes. Explain and apply purchasing power parity. Explain and apply interest rate parity (covered, uncovered).
Describe international financial regulation system. Discuss regulation of financial markets at the national level. Explain different regulation frameworks and mechanisms. Discuss international regulation of financial markets in the post-crisis period.

Course Contents

Introduction to the micro-aspects of international finance
Cash flow discounting
Interest rates
Investment decision making
Micro-aspects of risks in international finance. Risk and return
Debt market
Securities market
Valuation of shares and bonds
Banking sector
Foreign exchange market
Money market funds. Fintech
Introduction to the macro-aspects of international finance
International financial market
Exchange rate and exchange rate regimes
International monetary system
Balance of Payments
International trade finance
International credit
Institutional structure of international finance
International financial regulation
Macro-aspects of risks in international finance
Russia in international finance

Assessment Elements

Семинары
Контрольная работа 1 (КР-1)
Контрольная работа 2 (КР-2)
Эссе
Опциональный экзамен
Экзамен для получивших итоговую оценку 0-3
Практическое задание

Interim Assessment

2022/2023 4th module
0.1 * Практическое задание + 0 * Опциональный экзамен + 0 * Экзамен для получивших итоговую оценку 0-3 + 0.2 * Эссе + 0.3 * Семинары + 0.2 * Контрольная работа 1 (КР-1) + 0.2 * Контрольная работа 2 (КР-2)

Bibliography

Recommended Core Bibliography

Alternative banking and financial crisis, , 2014
An introduction to investment banks, hedge funds, and private equity : the new paradigm, Stowell, D. P., 2010
Balance of payments : theory and economic policy, Stern, R. M., 2007
Bank Guarantees in International Trade : The Law and Practice of Independent (First Demand) Guarantees and Standby Letters of Credit in Civil Law and Common Law Jurisdictions, Bertrams, R.I.V.F., 1998
Barnett, J. (2015). Global Financial Crisis : Causes, Consequences and Impact on Economic Growth. Hauppauge, New York: Nova Science Publishers, Inc. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1164788
Baskaya, Y. S., di Giovanni, J., Kalemli-Özcan, Ş., Peydro, J.-L., & Ulu, M. F. (2017). Capital flows and the international credit channel. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.99AA2563
Berk, J. B., & DeMarzo, P. M. (2014). Corporate Finance: The Core, Global Edition (Vol. Third edition). Boston: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1417990
Beyond the World Bank agenda : an institutional approach to development, Stein, H., 2008
Böninghausen, B., & Köhler, M. (2015). Diversification and determinants of international credit portfolios: Evidence from German banks. International Review of Economics & Finance, (C), 57. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.reveco.v39y2015icp57.75
Central bank cooperation at the bank for international settlements, 1930-1973, Toniolo, G., 2005
Cesa-Bianchi, A., Ferrero, A., & Rebucci, A. (2018). International credit supply shocks. Journal of International Economics, (C), 219. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.inecon.v112y2018icp219.237
Chalmers and Guest on bills of exchange, cheques and promissory notes, Guest, A. G., 1998
Chen, Q., Filardo, A., He, D., & Zhu, F. (2015). Financial Crisis, US Unconventional Monetary Policy and International Spillovers. [N.p.]: INTERNATIONAL MONETARY FUND. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1255567
China and the global financial crisis : a comparison with Europe, , 2012
CIURLĂU, F. C. (2018). Financial Globalization and Economic Dynamics. Economics, Management & Financial Markets, 13(3), 340–350. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=bsu&AN=132128343
Commercial bank management, Rose, P. S., 2002
Commercial banking : the management of risk, Gup, B. E., 2005
Crash and beyond : causes and consequences of the global financial crisis, Farlow, A., 2018
Credit, currency, or derivatives: instruments of global financial stability or crisis?, , 2009
Dealing with financial risk, Shirreff, D., 2004
Delusions of development : the World Bank and the post-Washington consensus in Southeast Asia, Carroll, T., 2010
Derivatives, Pirie, W. L., 2017
Dictionary of international trade finance : terms, Hammett, M., 2001
Diehl, E., Clift, J., & International Monetary Fund. (2007). Financial Globalization : A Compilation of Articles From Finance & Development. Washington, D.C.: International Monetary Fund. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=449549
Dorrucci, E. (2011). The international monetary system after the financial crisis / by Ettore Dorruci and Julie McKay. Frankfurt/Main: European Central Bank. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edswao&AN=edswao.401327019
Dynamic economic decision making : strategies for financial risk, capital markets, and monetary policy, Silvia, J. E., 2011
Eichengreen, B. J. (2019). Globalizing Capital : A History of the International Monetary System - Third Edition (Vol. Third edition). Princeton, New Jersey: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=2043366
Encyclopedic dictionary of international finance and banking, Shim, J. K., 2001
Felix I. Lessambo. (2021). International Finance : New Players and Global Markets. Palgrave Macmillan.
Financial crises, liquidity, and the international monetary system, Tirole, J., 2002
Financial globalization : growth, integration, innovation and crisis, Das, D. K., 2010
Financial globalization and economic performance, , 2011
Financial globalization and the emerging market economies, Das, D. K., 2012
Financial risk measurement and management, , 2012
Gao, S. (2018). International Leasing : Strategy and Decision. Abingdon, Oxon: Routledge. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1990063
Giancarlo Gandolfo. (2016). International Finance and Open-Economy Macroeconomics. Springer. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.spr.sptbec.978.3.662.49862.0
Globalization of international financial markets : causes and consequences, Kim, H.- M., 1999
Grahame Thompson. (2019). Financial globalization? History, conditions and prospects. Chapters, 32. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.h.elg.eechap.18293.2
International credit and collections : a guide to extending credit worldwide, , 2001
Klapper, L. (2005). The role of factoring for financing small and medium enterprises. Policy Research Working Paper Series. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.wbk.wbrwps.3593
Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2017). International Finance: Theory and Policy, Global Edition (Vol. Eleventh edition). Boston: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1649947
Liaw, K. T. (2012). The Business of Investment Banking : A Comprehensive Overview (Vol. 3rd ed). Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=400994
Mishkin, F. S., & Eakins, S. (2016). Financial Markets and Institutions, Global Edition (Vol. Eighth edition, Global edition). Harlow: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1419018
Nakatani, R. (2018). Adjustment to negative price shocks by a commodity exporting economy: Does exchange rate flexibility resolve a balance of payments crisis? Journal of Asian Economics, (C), 13. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.asieco.v57y2018icp13.35
Narcisa Roxana MOȘTEANU. (2019). International Financial Markets face to face with Artificial Intelligence and Digital Era.
Paul D. Clifford. (2021). Project Finance : Applications and Insights to Emerging Markets Infrastructure. Wiley.
Peter Christoffersen. (2012). Elements of Financial Risk Management: Vol. 2nd ed. Academic Press.
Población García, F. J. (2017). Financial Risk Management : Identification, Measurement and Management. Cham: Palgrave Macmillan. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1292890
Soufani, K. (2002). On the determinants of factoring as a financing choice: evidence from the UK. Journal of Economics and Business, (2), 239. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.jebusi.v54y2002i2p239.252
Stern, R. (2017). Balance of Payments : Theory and Economic Policy (Vol. First edition). London: Routledge. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=1565159
Valdez, S., & Molyneux, P. (2015). An Introduction to Global Financial Markets: Vol. 8th ed. Palgrave Macmillan.

Recommended Additional Bibliography

Berk, J. B., & DeMarzo, P. M. (2017). Corporate Finance: The Core, Global Edition: Vol. Fourth edition. Pearson.
Peterson Drake, P., & Fabozzi, F. J. (2010). The Basics of Finance : An Introduction to Financial Markets, Business Finance, and Portfolio Management. Hoboken, NJ: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=335336

Authors

DZHAGITYAN EDUARD PAVLOVICH
PODRUGINA ANASTASIYA VIKTOROVNA
BONDARENKO KSENIYA ANDREEVNA

Course Syllabus