IBF622 Paying for the Real Economy: the Theory and Financing of International Trade

This course will prepare students to understand international trade from multiple dimensions necessary to enhance student’s preparation for working in fields of international banking and finance. The first part of the course will present mainstream theories and empirical tests of international trade, with focuses on why and how countries trade and use policy to alter trade flows. The second part of the course will analyze the markets for money from which agents obtain currency to pay for traded goods and pay particular attention to explaining currency exchange rates in terms of economic fundamentals.  This part will also examine strategies to manage exchange rate risk.

The third part of the course will explain and analyze multiple ways to hedge against uncertainties inherent in the financing and shipping of goods across borders. It considers risks unique to the cross-border trade in goods. Will an exporter follow through on his commitment to export? Will the shipped goods measure up to the criteria described in the contract? Will the importer pay on time? Will government agencies interfere with the transaction?

Pre-requisite: None (though IBF604 Financial Econometrics I is strongly recommended as is a good understanding of microeconomic and macroeconomic theory)

Co-requisite: None (though IBF618 is strongly recommended)