Dr Liliana Varela

This course is available on the CEMS Exchange, Global MSc in Management, Global MSc in Management (CEMS MIM), Global MSc in Management (MBA Exchange), MBA Exchange, MSc in Accounting and Finance, MSc in Financial History and MSc in Management (1 Year Programme). This course is available with permission as an outside option to students on other programmes where regulations permit.

Students on the International Political Economy MSc, on the Master in Public Administration and on other MSc programmes are also welcome to choose this course provided they meet the pre-requisites below.  These students need to sign up for the course on LfY first and then email the course leader with information on their economics and/or finance background and their motivation for choosing the course. The course leader will then approve their application on LSE for You.  In the past students on the IPE MSc, MPA, MSc in Economic History, European Institute, Master of Science in Development Management, Master of Science in Economy, Risk and Society, Master of Science in Law and Accounting have enjoyed this course.

This course is not open to students from the following departments: Economics, Finance, Mathematics, and Statistics.

This course has a limited number of places (it is controlled access). In previous years we have been able to provide places for all students that apply but that may not continue to be the case.

This course does not permit auditing students.

Some background in economics and / or finance.

The objective of the course is to equip students with the relevant academic research, techniques and analytical skills to interpret current developments in the fast-changing area of international finance.

This course approaches such key issues and topics in international finance using the exchange and rate as a unifying theme. The foreign exchange market is the largest financial market, turning over every couple of weeks the equivalent of the yearly value of pre-C19 global GDP. It is also a unique market where prices are determined not only by the fundamentals of this asset class but also by government and central bank interventions.  Exchange rates are an open economy’s most important price as they can affect the relative value of an entire economy.

First, the course considers what finance and economic theory identify as the determinants of the relative price of two currencies. Second, the course analyses governments’ available policy choices to influence the level and volatility of the relative price of its currency and how these choices differ across countries. . Third, the course examines exchange rates as a source and conduit of global financial instability. Fourth, the course focuses on the risk and exposure for investors and firms arising from exchange rate market volatility. It examines the valuation of currency instruments and their use in strategies to hedge that exposure. It also analyses the structure, trading and organisation of the forex market and its central role in international finance.

The teaching approach combines theory, analyses of data and empirical examples. It also gives emphasis on fundamental concepts, principles, and analytical theories that are more robust to answer the most relevant questions within the area of international finance.

30 hours of seminars in the WT.

Bekaert, G., & Hodrick, R. (2017). International Financial Management (3rd ed.). Cambridge: Cambridge University Press. doi:10.1017/9781316282274 

Keith Pilbeam International Finance (Palgrave, 2023, 5th edition)

Further readings (optional): textbooks for students who want to explore FM472 topics beyond the lectures’ material. These readings are not part of the exam material.

• C. Eun, B. Resnick and T. Chuluun (2021), International Financial Management, 9th edition;
• Sercu, P (2020), International Finance, Princeton University Press ;
• P. Krugman, M. Obstfeld and M. Melitz (2018), International Finance, Pearson, 11th edition;

Handouts and Moodle

Slides presented during the lecture are posted on Moodle. Class assignments are also posted on Moodle the week before the relevant class. Guidelines to solutions for numerical questions are posted on Moodle after they are covered in class.

Exam (75%, duration: 2 hours) in the spring exam period.
Research project (15%) and continuous assessment (10%) in the WT.

• Exam (75%): The exam is a two-hour written examination, which includes both essay-type and numerical questions. Two instances of exams from past years will be provided on Moodle along with solutions.
• Group project (15%): Group written report. Essential information for the compulsory group project is provided during the first lecture and the first class in January 2025.
• Continuous assessment (10%): Continuous assessment takes the form of in-class participation.