|Unit level:||Level 3|
|Teaching period(s):||Full year|
|Offered by||Alliance Manchester Business School|
|Available as a free choice unit?:||N
- BMAN23000 - Foundations of Finance A (Compulsory)
- BMAN23000B - Foundations of Finance B (Compulsory)
Additional RequirementsBMAN23000(A) or BMAN23000(B) is a pre-requisite of BMAN 30060.
Pre-requisite course units have to be passed by 40% or above at the first attempt unless a higher percentage is indicated within this course outline. If the pre-requisite unit is defined as a compulsory course unit within your programme of study (Maths with Finance, IBFE, Accounting, BA Econ pathways for example) then progression onto the dependent unit is permitted as long as you have gained the appropriate amount of credit to progress on to the following year of your registered undergraduate programme.
Familiarise students with:
- The institutional structure, the nature of the trading procedures, and trading activity in foreign exchange (FOREX) markets.
- The international parity conditions: purchasing power parity, covered and uncovered interest rate parity, and real interest parity.
- The equilibrium real exchange rate and its determinants.
- Issues relating to the efficiency of foreign exchange markets and the forward bias puzzle.
- The pricing of international financial assets and their role in financing
and investment decisions.
- The financial management problems faced by firms that operate within the international financial environment.
- The theoretical models of exposure measurement.
- The importance of international pricing strategy, inflation risk, market efficiency and country risk in terms of their implications for managing and hedging financial risk.
- International asset pricing, portfolio diversification and the home bias puzzle.
As corporations and institutions conduct their businesses in an increasingly integrated world, the need to understand the behaviour of international financial markets becomes ever apparent. In the first semester this course focuses on the foreign exchange market and major approaches to analysing the determination of exchange rates. We also explore the links between exchange rates, macroeconomic activity and a country’s international competitiveness. To provide the requisite foundations, the course begins with a critical appraisal of the institutional features of foreign exchange markets. The international parity conditions are then considered in some detail. Subsequent to an analysis of purchasing power parity and the determination of real exchange rates, the semester concludes with a critical analysis of international portfolio diversification, the equity home-bias puzzle, and international equity asset pricing models.
In the second semester, the course unit focuses on the problems faced by firms operating within the international financial environment. Emphasis will be placed on the impact of foreign exchange rate fluctuations on assets and liabilities denominated in foreign currencies, and on theoretical and empirical models of exposure measurement. The importance of international pricing, inflation risk, market efficiency and country risk in terms of their implications for managing and hedging financial risk will also be considered. The process and nature of international capital budgeting and financial decision making will also be studied.
Teaching and learning methods
44 hours of lectures (22 hours per semester).
Full details will be provided in the course outline at the start of the course.
Total study hours: 200 hours split between lectures, classes, self study and preparation for classes, coursework and examinations.
Informal Contact Methods
1. Office Hours
2. Online Learning Activities (discussions, formative assessment questions)
3. Other: Formative Assessment feedback.
By the end of the course students should have:
- acquired an in-depth understanding of the relationship between exchange rates and macroeconomic activity, and a country's competitiveness in international markets;
- acquired a practical understanding of the operation of the spot and forward foreign exchange (forex) markets;
- acquired an appreciation of the importance of the international parity conditions;
- a strong theoretical and conceptual understanding of the financial and investment problems facing firms that operate in the international global environment and the financial tools that can be used to minimize these problems;
- a practical understanding of how firms manage the problems associated with foreign exchange exposure and the extent to which corporate hedging impacts on the firm’s value.
Successful acquisition of these learning outcomes will enhance subject area knowledge and understanding, providing the high-level technical, critical and analytical capabilities required for employment in the financial sector.
Assessment Further Information
2 x 1.5 hour examinations (each worth 50%), one in January, one in May.
For semester 1 only exchange students admitted via the Alliance Manchester Business School International Office that take this course as BMAN30891 the assessment will be:
Term paper/report of between 1,800-2,000 words on a topic to be set by the instructor at the beginning of the course.
Bekaert, G., and Hodrick, R., (2012), International Financial Management, 2nd edition, Pearson.
Eun, C., and Resnick, B., (2014), International Finance, Global edition, McGraw-Hill.
• Informal advice and discussion during a lecture or scheduled office hours. Revision advice scheduled during the final lecture.
• Responses to student emails and questions from a member of staff, including feedback provided to a group via an online discussion forum.
• Written and/or verbal comments on assessed coursework.
• Generic feedback posted on Blackboard regarding overall examination performance.
• Formative assessment set regularly with feedback provided on Blackboard.
- Assessment written exam - 3 hours
- Lectures - 40 hours
- Independent study hours - 157 hours