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International Finance Theory into Practice

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ISBN-10: 069113667X

ISBN-13: 9780691136677

Edition: 2009

Authors: Piet Sercu, P. Sercu

List price: $98.00
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Book details

List price: $98.00
Copyright year: 2009
Publisher: Princeton University Press
Publication date: 3/1/2009
Binding: Hardcover
Pages: 832
Size: 7.25" wide x 10.00" long x 1.75" tall
Weight: 3.872

Neil M. Gorsuch is a judge on the U.S. Court of Appeals for the Tenth Circuit. He holds a doctorate in legal philosophy from the University of Oxford and a law degree from Harvard University. A former clerk to U.S. Supreme Court justices Byron White and Anthony Kennedy, he has published widely on assisted suicide and many other contemporary legal problems. He previously served as Principal Deputy to the Associate Attorney General and as Acting Associate Attorney General at the U.S. Department of Justice, and was a partner at the law firm of Kellogg, Huber, Hansen, Todd, Evans & Figel.Piet Sercu is professor of international finance at the Catholic University of Leuven. He is the coauthor,…    

Introduction and Motivation for International Finance
Why Does the Existence of Borders Matter for Finance?
Key Issues in International Business Finance
What Is on the International CFO's Desk?
Overview of this Book
International Finance: Institutional Background
Money and Banking: A Brief Review
The International Payment Mechanism
International ("Euro") Money and Bond Markets
What Is the Balance of Payments?
Exchange-Rate Regimes
Test Your Understanding
Currency Markets
About This Part
Spot Markets for Foreign Currency
Exchange Rates
Major Markets for Foreign Exchange
The Law of One Price for Spot Exchange Quotes
Translating FC Figures: Nominal Rates, PPP Rates, and Deviations from PPP
CFO's Summary
Technical Notes
Test Your Understanding
Understanding Forward Exchange Rates for Currency
Introduction to Forward Contracts
The Relation between Exchange and Money Markets
The Law of One Price and Covered Interest Parity
The Market Value of an Outstanding Forward Contract
CFO's Summary
Appendix: Interest Rates, Returns, and Bond Yields
Appendix: The Forward Forward and the Forward Rate Agreement
Test Your Understanding
Using Forwards for International Financial Management
Practical Aspects of Forwards in Real-World Markets
Using Forward Contracts (1): Arbitrage
Using Forward Contracts (2): Hedging Contractual Exposure
Using Forward Contracts (3): Speculation
Using Forward Contracts (4): Minimizing the Impact of Market Imperfections
Using the Forward Rate in Commercial, Financial, and Accounting Decisions
CFO's Summary
Test Your Understanding
The Market for Currency Futures
Handling Default Risk in Forward Markets: Old and New Tricks
How Futures Contracts Differ from Forward Markets
Effect of Marking to Market on Futures Prices
Hedging with Futures Contracts
The CFO's Conclusion: Pros and Cons of Futures Contracts Relative to Forward Contracts
Appendix: Eurocurrency Futures Contracts
Technical Notes
Test Your Understanding
Markets for Currency Swaps
How the Modern Swap Came About
The Fixed-for-Fixed Currency Swaps
Interest-Rate Swaps
Cross-Currency Swaps
CFO's Summary
Technical Notes
Test Your Understanding
Currency Options (1): Concepts and Uses
An Introduction to Currency Options
Institutional Aspects of Options Markets
An Aside: Futures-Style Options on Futures
Using Options (1): Arbitrage
Using Options (2): Hedging
Using Options (3): Speculation
CFO's Summary
Test Your Understanding
Currency Options (2): Hedging and Valuation
The Logic of Binomial Option Pricing: One-Period Problems
Notation and Assumptions for the Multiperiod Binomial Model
Stepwise Multiperiod Binomial Option Pricing
Toward Black-Merton-Scholes (European Options)
CFO's Summary
Technical Notes
Test Your Understanding
Exchange Risk, Exposure, and Risk Management
About This Part
Do We Know What Makes Forex Markets Tick?
The Behavior of Spot Exchange Rates
The PPP Theory and the Behavior of the Real Exchange Rate
Exchange Rates and Economic Policy Fundamentals
Technical Notes
Do Forex Markets Themselves See What Is Coming?
The Forward Rate as a Black-Box Predictor
Forecasts by Specialists
CFO's Summary
Test Your Understanding
(When) Should a Firm Hedge Its Exchange Risk?
The Effect of Corporate Hedging May Not Just Be "Additive"
FAQs about Hedging
CFO's Summary
Test Your Understanding
Measuring Exposure to Exchange Rates
The Concepts of Risk and Exposure: A Brief Survey
Contractual-Exposure Hedging and Its Limits
Measuring and Hedging of Operating Exposure
Accounting Exposure
Test Your Understanding
Value-at-Risk: Quantifying Overall Net Market Risks
Risk Budgeting: A Factor-Based, Linear Approach
The Linear/Normal VaR Model: Potential Flaws and Corrections
Historical Backtesting, Bootstrapping, Monte Carlo, and Stress Testing
CFO's Summary
Epilogue: The Credit Crunch Blues
Test Your Understanding
Managing Credit Risk in International Trade
Payment Modes without Bank Participation
Documentary Payment Modes with Bank Participation
Other Standard Ways of Coping with Default Risk
CFO's Summary
Test Your Understanding
Long-Term International Funding and Direct Investment
About This Part
International Fixed-Income Markets
"Euro" Deposits and Loans
International Bond and Commercial-Paper Markets
How to Weigh Your Borrowing Alternatives
CFO's Summary
Test Your Understanding
Segmentation and Integration in the World's Stock Exchanges
Background Information on International Stock Markets
Why Don't Exchanges Simply Merge?
Can Unification Be Achieved by a Winner Taking All?
CFO's Summary
Test Your Understanding
Why-or When-Should We Cross List Our Shares?
Why Might Companies Want to List Shares Abroad?
Shareholders' Likely Reaction to Diversification Opportunities
Sifting through the Empirics on Cross-Listing Effects
CFO's Summary
Test Your Understanding
Setting the Cost of International Capital
The Link between Capital-Market Segmentation and the Sequencing of Discounting and Translation
The Single-Country CAPM
The International CAPM
The CFO's Summary re Capital Budgeting
Technical Notes
Test Your Understanding
International Taxation of Foreign Investments
Forms of Foreign Activity
Multiple Taxation versus Tax Neutrality
International Taxation of a Branch (1): The Credit System
International Taxation of a Branch (2): The Exclusion System
Remittances from a Subsidiary: An Overview
International Taxation of a Subsidiary (1): The Credit System
International Taxation of a Subsidiary (2): The Exclusion System
CFO's Summary
Test Your Understanding
Putting It All Together: International Capital Budgeting
Domestic Capital Budgeting: A Quick Review
InNPV Issue #1: How to Deal with the Implications of Nonequity Financing
InNPV Issue #2: How to Deal with Exchange Rates
InNPV Issue #3: How to Deal with Political Risks
Issue #4: Make Sure to Include All Incremental Cash Flows
Other Things to Do in Spreadsheets While You're There
CFO's Summary
Technical Notes
Test Your Understanding
Negotiating a Joint-Venture Contract: The NPV Perspective
The Three-Step Approach to Joint-Venture Capital Budgeting
A Framework for Profit Sharing
Case I: A Simple Pro-Rata Joint Branch with Neutral Taxes and Integrated Capital Markets
Case II: Valuing a Pro-Rata Joint Branch when Taxes Differ
Case III: An Unbundled Joint Venture with a License Contract or a Management Contract
CFO's Summary and Extensions
Test Your Understanding
Further Reading