International Finance: Theory into Practice available in Hardcover
- ISBN-10:
- 069113667X
- ISBN-13:
- 9780691136677
- Pub. Date:
- 03/22/2009
- Publisher:
- Princeton University Press
- ISBN-10:
- 069113667X
- ISBN-13:
- 9780691136677
- Pub. Date:
- 03/22/2009
- Publisher:
- Princeton University Press
Hardcover
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Overview
The text includes an extensive introduction followed by three main sections: currency markets; exchange risk, exposure, and risk management; and long-term international funding and direct investment. Each section begins with a short case study, and each of the sections' chapters concludes with a CFO summary, examining how a hypothetical chief financial officer might apply topics to a managerial setting. The book also contains end-of-chapter questions to help students grasp the material presented.
Focusing on international markets and multinational corporate finance, International Finance is the go-to resource for students seeking a complete understanding of the field.
- Rigorous focus on international financial markets and corporate finance concepts
- An up-to-date and practice-oriented approach
- Strong real-world examples and applications
- Comprehensive look at valuation, funding, and risk management
- Introductory case studies and "CFO summaries," and end-of-chapter quiz questions
- Solutions to the quiz questions are available online
Product Details
ISBN-13: | 9780691136677 |
---|---|
Publisher: | Princeton University Press |
Publication date: | 03/22/2009 |
Edition description: | New Edition |
Pages: | 832 |
Product dimensions: | 7.40(w) x 10.10(h) x 1.80(d) |
About the Author
Table of Contents
Preface xiAcknowledgments xiv
Part I: Introduction and Motivation for International Finance 1Chapter 1: Why Does the Existence of Borders Matter for Finance? 31.1 Key Issues in International Business Finance 41.2 What Is on the International CFO's Desk? 111.3 Overview of this Book 13
Chapter 2: International Finance: Institutional Background 162.1 Money and Banking: A Brief Review 162.2 The International Payment Mechanism 282.3 International ("Euro") Money and Bond Markets 332.4 What Is the Balance of Payments? 352.5 Exchange-Rate Regimes 45Test Your Understanding 58
Part II: Currency Markets 63About This Part 65Chapter 3: Spot Markets for Foreign Currency 693.1 Exchange Rates 693.2 Major Markets for Foreign Exchange 783.3 The Law of One Price for Spot Exchange Quotes 873.4 Translating FC Figures: Nominal Rates, PPP Rates, and Deviations from PPP 973.5 CFO's Summary 1083.6 Technical Notes 110Test Your Understanding 110
Chapter 4: Understanding Forward Exchange Rates for Currency 1154.1 Introduction to Forward Contracts 1154.2 The Relation between Exchange and Money Markets 1194.3 The Law of One Price and Covered Interest Parity 1234.4 The Market Value of an Outstanding Forward Contract 1304.5 CFO's Summary 1404.6 Appendix: Interest Rates, Returns, and Bond Yields 1414.7 Appendix: The Forward Forward and the Forward Rate Agreement 145Test Your Understanding 154
Chapter 5: Using Forwards for International Financial Management 1575.1 Practical Aspects of Forwards in Real-World Markets 1575.2 Using Forward Contracts (1): Arbitrage 1615.3 Using Forward Contracts (2): Hedging Contractual Exposure 1645.4 Using Forward Contracts (3): Speculation 1725.5 Using Forward Contracts (4): Minimizing the Impact of Market Part Imperfections 1775.6 Using the Forward Rate in Commercial, Financial, and Accounting Decisions 1905.7 CFO's Summary 194Test Your Understanding 198
Chapter 6: The Market for Currency Futures 2026.1 Handling Default Risk in Forward Markets: Old and New Tricks 2026.2 How Futures Contracts Differ from Forward Markets 2076.3 Effect of Marking to Market on Futures Prices 2156.4 Hedging with Futures Contracts 2186.5 The CFO's Conclusion: Pros and Cons of Futures Contracts Relative to Forward Contracts 2266.6 Appendix: Eurocurrency Futures Contracts 2276.7 Technical Notes 232Test Your Understanding 234
Chapter 7: Markets for Currency Swaps 2397.1 How the Modern Swap Came About 2407.2 The Fixed-for-Fixed Currency Swaps 2447.3 Interest-Rate Swaps 2527.4 Cross-Currency Swaps 2567.5 CFO's Summary 2587.6 Technical Notes 259Test Your Understanding 259
Chapter 8: Currency Options (1): Concepts and Uses 2628.1 An Introduction to Currency Options 2628.2 Institutional Aspects of Options Markets 2698.3 An Aside: Futures-Style Options on Futures 2728.4 Using Options (1): Arbitrage 2758.5 Using Options (2): Hedging 2818.6 Using Options (3): Speculation 2888.7 CFO's Summary 291Test Your Understanding 294
Chapter 9: Currency Options (2): Hedging and Valuation 2999.1 The Logic of Binomial Option Pricing: One-Period Problems 3009.2 Notation and Assumptions for the Multiperiod Binomial Model 3069.3 Stepwise Multiperiod Binomial Option Pricing 3129.4 Toward Black-Merton-Scholes (European Options) 3199.5 CFO's Summary 3239.6 Technical Notes 325Test Your Understanding 331
Part III: Exchange Risk, Exposure, and Risk Management 337About This Part 339Chapter 10: Do We Know What Makes Forex Markets Tick? 34210.1 The Behavior of Spot Exchange Rates 34410.2 The PPP Theory and the Behavior of the Real Exchange Rate 35810.3 Exchange Rates and Economic Policy Fundamentals 37310.4 Conclusion 38410.5 Technical Notes 385
Chapter 11: Do Forex Markets Themselves See What Is Coming? 39811.1 The Forward Rate as a Black-Box Predictor 39811.2 Forecasts by Specialists 41811.3 CFO's Summary 423Test Your Understanding 428
Chapter 12: (When) Should a Firm Hedge Its Exchange Risk? 43412.1 The Effect of Corporate Hedging May Not Just Be "Additive" 43512.2 FAQs about Hedging 44312.3 CFO's Summary 448Test Your Understanding 449
Chapter 13: Measuring Exposure to Exchange Rates 45413.1 The Concepts of Risk and Exposure: A Brief Survey 45513.2 Contractual-Exposure Hedging and Its Limits 45713.3 Measuring and Hedging of Operating Exposure 46113.4 Accounting Exposure 474Test Your Understanding 487
Chapter 14: Value-at-Risk: Quantifying Overall Net Market Risks 49314.1 Risk Budgeting: A Factor-Based, Linear Approach 49414.2 The Linear/Normal VaR Model: Potential Flaws and Corrections 50214.3 Historical Backtesting, Bootstrapping, Monte Carlo, and Stress Testing 51514.4 CFO's Summary 52014.5 Epilogue: The Credit Crunch Blues 524Test Your Understanding 528
Chapter 15: Managing Credit Risk in International Trade 53015.1 Payment Modes without Bank Participation 53115.2 Documentary Payment Modes with Bank Participation 53615.3 Other Standard Ways of Coping with Default Risk 54215.4 CFO's Summary 545Test Your Understanding 546
Part IV: Long-Term International Funding and Direct Investment 551About This Part 553Chapter 16: International Fixed-Income Markets 55816.1 "Euro" Deposits and Loans 55916.2 International Bond and Commercial-Paper Markets 57216.3 How to Weigh Your Borrowing Alternatives 58116.4 CFO's Summary 590Test Your Understanding 592
Chapter 17: Segmentation and Integration in the World's Stock Exchanges 59517.1 Background Information on International Stock Markets 59917.2 Why Don't Exchanges Simply Merge? 61817.3 Can Unification Be Achieved by a Winner Taking All? 62517.4 CFO's Summary 638Test Your Understanding 639
Chapter 18: Whyor WhenShould We Cross List Our Shares? 64118.1 Why Might Companies Want to List Shares Abroad? 64218.2 Shareholders’ Likely Reaction to Diversification Opportunities 64618.3 Sifting through the Empirics on Cross-Listing Effects 65118.4 CFO's Summary 660Test Your Understanding 662
Chapter 19: Setting the Cost of International Capital 66319.1 The Link between Capital-Market Segmentation and the Sequencing of Discounting and Translation 66619.2 The Single-Country CAPM 66919.3 The International CAPM 68019.4 The CFO's Summary re Capital Budgeting 69019.5 Technical Notes 693Test Your Understanding 696
Chapter 20: International Taxation of Foreign Investments 70320.1 Forms of Foreign Activity 70320.2 Multiple Taxation versus Tax Neutrality 70920.3 International Taxation of a Branch (1): The Credit System 71220.4 International Taxation of a Branch (2): The Exclusion System 71820.5 Remittances from a Subsidiary: An Overview 72120.6 International Taxation of a Subsidiary (1): The Credit System 72420.7 International Taxation of a Subsidiary (2): The Exclusion System 73020.8 CFO's Summary 732Test Your Understanding 733
Chapter 21: Putting It All Together: International Capital Budgeting 73921.1 Domestic Capital Budgeting: A Quick Review 73921.2 InNPV Issue #1: How to Deal with the Implications of Nonequity Financing 75121.3 InNPV Issue #2: How to Deal with Exchange Rates 75821.4 InNPV Issue #3: How to Deal with Political Risks 76021.5 Issue #4: Make Sure to Include All Incremental Cash Flows 76521.6 Other Things to Do in Spreadsheets While You're There 76621.7 CFO's Summary 76821.8 Technical Notes 770Test Your Understanding 773
Chapter 22: Negotiating a Joint-Venture Contract: The NPV Perspective 77722.1 The Three-Step Approach to Joint-Venture Capital Budgeting 77922.2 A Framework for Profit Sharing 78122.3 Case I: A Simple Pro-Rata Joint Branch with Neutral Taxes and Part Integrated Capital Markets 78222.4 Case II: Valuing a Pro-Rata Joint Branch when Taxes Differ 78422.5 Case III: An Unbundled Joint Venture with a License Contract or a Management Contract 78622.6 CFO's Summary and Extensions 793Test Your Understanding 797
Further Reading 801References 803Part Index 813
What People are Saying About This
Analytical and rigorous, International Finance presents fresh data, cohesively organized chapters, and timely issues.
G. Andrew Karolyi, Ohio State University
This book combines a rigor and practicality that few leading finance textbooks achieve. Once you have read it you will understand what matters in international finance, what does not, and how to deal with both.
Ian Cooper, London Business School
This will become a classic of international finance.
Philippe Jorion, University of California, Irvine
This accessible and important book provides a big picture for corporate finance within the context of the international financial markets.
Karen K. Lewis, University of Pennsylvania
This textbook employs modern finance in an international setting, all presented in the clearest, most stimulating way. In addition to each chapter being accompanied by a set of exercises, each part of the textbook is also nicely complemented by a case study. Comprehensive and up to date, the book covers everything from forward exchange rates, exchange risks, costs of international capital, and international taxation, to cross listings, swaps, and values at risk. There is no doubt this is the premier textbook for international finance.
Suleyman Basak, London Business School
I cannot think of a more comprehensive and more operationally relevant textbook than this one. Having read it, a student or practitioner is ready for operational work and duly prepared to avoid all the conceptual pitfalls commonly encountered on the international side of finance.
Bernard Dumas, University of Lausanne and Swiss Finance Institute
Piet Sercu's tour de force provides the most comprehensive treatment of major issues in international finance among all the books in the field. The author defines the key issues up front, tackles them in a coherent and focused manner, and strikes the right balance between basic concepts and practical applications. Readers can feel the pulse of world financial markets from the author's lively explanations of market mechanisms and conventions. Clear, entertaining, and up-to-date, this book sets a high standard for the study of international finance.
Cheol Eun, Georgia Institute of Technology
"This will become a classic of international finance."—Philippe Jorion, University of California, Irvine"This book combines a rigor and practicality that few leading finance textbooks achieve. Once you have read it you will understand what matters in international finance, what does not, and how to deal with both."—Ian Cooper, London Business School"I cannot think of a more comprehensive and more operationally relevant textbook than this one. Having read it, a student or practitioner is ready for operational work and duly prepared to avoid all the conceptual pitfalls commonly encountered on the international side of finance."—Bernard Dumas, University of Lausanne and Swiss Finance Institute"This textbook employs modern finance in an international setting, all presented in the clearest, most stimulating way. In addition to each chapter being accompanied by a set of exercises, each part of the textbook is also nicely complemented by a case study. Comprehensive and up to date, the book covers everything from forward exchange rates, exchange risks, costs of international capital, and international taxation, to cross listings, swaps, and values at risk. There is no doubt this is the premier textbook for international finance."—Suleyman Basak, London Business School"Piet Sercu's tour de force provides the most comprehensive treatment of major issues in international finance among all the books in the field. The author defines the key issues up front, tackles them in a coherent and focused manner, and strikes the right balance between basic concepts and practical applications. Readers can feel the pulse of world financial markets from the author's lively explanations of market mechanisms and conventions. Clear, entertaining, and up-to-date, this book sets a high standard for the study of international finance."—Cheol Eun, Georgia Institute of Technology"Analytical and rigorous, International Finance presents fresh data, cohesively organized chapters, and timely issues."—G. Andrew Karolyi, Ohio State University"This accessible and important book provides a big picture for corporate finance within the context of the international financial markets."—Karen K. Lewis, University of Pennsylvania