Topic and Readings                                                             Assignment 

1

1.  IFM  Chpt 1 Appendix 1A, Chpt 3

2.  Readings from World Trade Survey from Economist 10/3/98 (BP#2, W)

3. Profits over People  from Economist 10/3/98 (BP#3, W)

4. Is the US Current Account Deficit Sustainable? R. Cooper, CESIfo Forum, 2005   (BP#4, W)

Extra: (OL only)
The WTO at http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm)   
                (follow links for WTO in Brief, What is the WTO?-Chpt 1 and the Top 10 lists)
US Trade /BOP data (at http://www.bea.doc.gov/bea/ai1.htm)         

Practical Debate: (website only)
    The Overstretch Myth, Levey and Brown, Foreign Affairs, 2005 (W)
    How Scary Is the Deficit? Setser and Roubini, Foreign Affairs, 2005 (W) 
        What Businesses Need to Know about the US Current Account Deficit,   McKinsey, 2007 (W)

2

1. IFM: Chpt 4 and 5 (pp. 107 – 113

2. All About the Foreign Exchange Market in the United States, FRBNY, Chpts 2, 3, 4, 5, and 7 (BP#5, W) or OL at: http://www.newyorkfed.org/education/addpub/usfxm/ )

3. Big Mac Index, Economist (BP#6, W) or OL at  http://www.economist.com/markets/bigmac/index.cfm)

Extra Analysis: (web only)

1. A Prism into the PPP Puzzles – Parsley and Wei (W)

2. Triennial Survey of Foreign Exchange and Derivatives Market Activity 2004, BIS       2004, (web link or OL at http://www.bis.org/publ/rpfx04.pdf)

8/29&30

3

1. IFM: Chpt. 5 (remainder) and 6 (pp 138-143)
2.  All About the Foreign Exchange Market in the United States, FRBNY, Chpt. 11  (BP#7,or W) or OL at http://www.newyorkfed.org/education/addpub/usfxm/ )
3. Anomalies, Froot and Thaler, JEP 1990 (BP#8) or Web

Advanced optional reading:
    The Economics of Exchange Rates, M Taylor, JEL (1995) (W)

Problem Set #1 (W): Due WED 9/24 11:59pm EDT email to bodnar@jhu.edu)
one submission per study group -please include study group name in file name

9/26

4

1. IFM: Chpt. 2

2. The Foreign Exchange Market in the United States, FRBNY, Chpt. 10 (BP #9, W or OL at http://www.ny.frb.org/pihome/addpub/usfxm/)

3. A Primer on Emerging Market Crises, R Dornbusch, NBER paper (BP#10, W or OL at http://papers.nber.org/papers/w8326.pdf

Good Article on Global Imbalances
Bernanke's argument on Excess World Savings - Economist 9/22/05

Problem Set #2 (W) - Due FRI 10/3 (ONE WEEK) 11:59pm  EDT  email to bodnar@jhu.edu)

III. The Impact of Exchange Rates on the Firm

9/27

5

1. IFM Chpt 8 (pp. 192-193), Chpt 9 (pp. 225-234)

2. Corporate Exposures to Exchange Rates, classnote (BP#11 or W)

3. On the Measurement of Operating Exposure to Exchange Rates: A Conceptual     Approach," Flood and Lessard, FM 1986. (BP#12)

4. Identifying, Measuring and Hedging Currency Risk at Merck, Lewent and Kearney,  1990 (BP#13).

Extra Reading on Translation Exposure: 

1. IFM: Chpt 10

2. FAS#52- Measuring Performance of Foreign Operations (W)

Case: Jagular plc (BP#14) - Due 10/10 in class
also email to bodnar@jhu.edu 

10/10

Case: Jauguar plc - Class Discussion

6

C. Why Should a Firm Hedge?

1. An Integrated Approach to Corporate Risk Management, A. Shapiro and S. Titman MCJF, 1985 (BP #15)

2. Framework for Risk Management, Froot et al, HBR 1994 (BP #16)

Sample Exams and Solutions

10/25

7

1. IFM: Chapter 8 (pp.294-298) and Chpt 9 (pp. 234-240)

2. Techniques for Managing Economic Exposure,” classnote (BP #17 or W)

3. Wharton 1998 Survey of Financial Risk Management by U.S. Non-Financial Firms,  (BP #18 or OL at http://finance.wharton.upenn.edu/~weiss/research)   

Problem Set #3 (W) - Due WED 11/5  (11:59 EST email to bodnar@jhu.edu) 

8

1. IFM Chapter 21 and Chpt 19 (pp. 476 - 484)

2. Taxation of International Operations, Baker, Chpt 17 International Finance, 1998 (BP #19)

3. Transfer Pricing, Chpt 5 of Schadenwald and Misey (W) (BP #20)

   Dallas Semiconductor Case (W) - Due WED 11/19  (11:59 EST email to bodnar@jhu.edu) 

9

1. IFM Chapter 18 and Chpt 16 (pp. 410-417)
2. Valuation in Emerging Markets, McKinsey, 2000 (BP #21)

1. IFM: Chapter 15 and Chpt 17 (422 - 435)
2. Exchange Rates and International Differences in the Cost of Capital, McCaulley and Zimmer, FRBNY, 1994 (BP #22)
3. Globalization of Capital Markets and the Cost of Capital: The Case of Nestle, Stulz, JACF, Fall 1995 (BP #23)

11/22

11

1. IFM: Chpts 11, 12 and 13
2. Guidelines for Global Financing Choices, Lessard and Shapiro, MCFJ 1983 (BP #24)

Case: Return of Lafarge (W) - Due 12/5 (in class)
also email to bodnar@jhu.edu)

12/5

Second EXAM - Lectures 7 - 11 (in class 2:15 - 4:30pm)