K1 Critical knowledge of key theories and activities of international financial markets and understand their implications.

Faculty of Business, Law and Tourism MSc Finance and Management

Module Code: PGBM 144

Module Title: International Financial Markets and Econometrics

 Assignment Deadline:

Learning Outcomes:

Upon successful completion of this module, students will have demonstrated:

Knowledge

§  K1 Critical knowledge of key theories and activities of international financial markets and understand their implications.

§  K2 Critical understanding of methods of applied econometrics for rigorous analysis of financial markets.

§  K3 The ability to integrate theory with evidence to empirically evaluate financial theories and models to arrive at a conclusion.

Skills

§  S1 Data collection, presentation and interpretation skills.

§  S2 Computing skills and the use of econometrics software packages for the analysis and evaluation of the financial data.

Assessment Brief:

Answer All Questions and Parts.

 Each question/ part should be answered with close reference to key published academic literature and relevant financial data, charts and evidence.

 Overall word limit of this assignment is between 5000-6000 words, excluding charts, graphs, diagrams, and tables.

Assessment weight:            100% of the module 

Please note that this is an individual assignment and the provisions of the University “Policy on Cheating, Collusion and Plagiarism” apply to this assignment.

Question 1:

a) With a close reference to the recent movements in Pound /Dollar spot exchange rate, critically discuss main causes of exchange rate volatility in the foreign exchange markets.

b) How might exchange rate volatility impact international trade? (Use relevant financial data and charts to illustrate your answer). (15 marks)

Question 2:

a)Explain the nature and categories of currency exposures face by individuals and firms in international business and international financial transactions. Critically discuss how multinational firms and international traders might mitigate such currency exposures through derivative markets tools.

b)Describe how ‘cross hedging’ and ‘currency diversification’ work in reducing exposures and risks in international financial transactions.

c)Critically examine why a firm involved in international financial transactions should consider hedging net payables (or net receivables) with currency option contracts rather than (i) forward contracts, (ii) future contracts, and (iii) swap contracts.

(Give examples and use relevant financial charts to illustrate your answer). (25 marks) 

Question 3:

Critically examine how recent interest rate policy and quantitative easing operations via short term international money markets have impacted international capital markets and stock prices.

(Use the UK financial data and charts to illustrate your answer).(20 marks)

Question 4:

a)With a close reference to the efficient market hypothesis literature, carry out your own financial econometrics investigation to critically examine the level of informational efficiency of the London Stock Exchange (LSE) market. (Your answer should be based on your own results obtained from applying financial econometrics methods and software and a dataset on overall share price index and at least 3 companies quoted in the LSE market).

b)Critically discuss the implications of your empirical investigation for the financial markets. (40 marks)

Assessment Criteria:

1.Evidence of background reading and relevance of academic material and literature to the question posed.

2.Appropriate use of up-to date Harvard referencing system throughout.

3.Depth of analysis based on relevant and up-to-date academic literature and analysis supported by relevant empirical evidence.

4.Appropriate conclusion based on integration of key literature with relevant financial analysis and empirical evidence/ financial data.

Guidance on submission .

Please submit online via Canvas. Your submission must include a relevant Turnitin report.

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