The subject of International Economics, which analyzes open economies (interacting with the rest of the world) is divided traditionally in two parts. International Trade deals with flows of goods and services among countries. On the other hand, International Finance, our subject, deals with flows of capital. We will start with introducing gains from participating international trade and financial markets. Next we will study the foreign exchange market, which is the biggest financial market, dwarfing any other market by any measure. We will apply no arbitrage ideas to derive parity conditions for exchange rates. We will next turn our attention to the Euromarkets, futures, options and swaps and focus on the pricing of these new financial products. Finally, we will study developments in international portfolios and the measurement and management of risk in international financial positions.
After taking this class you should be able to fully understand what is at stake in the debates surrounding International Finance issues. You will have a framework for understanding the evolution of exchange rates, currency crises, etc. Also if you interview for a job related to International Finance, you should appear to be aware of important issues and equipped with a good grasp of the pertinent tools.
For textbook information, please visit the ECON Textbook Information Website. Information will be posted for each class as soon as it is available.