The latest book in The Current Issues in Finance Series, Piet Sercu and Raman Uppal's INTERNATIONAL FINANCIAL MARKETS AND THE FIRM sets a new standard in its clarity and rigor.
Distinguishing features include:
- Unified approach based on arbitrage-free pricing, which can be used to value assets whose payoffs depend on the exchange rate.
- In-depth discussions of the economic role of the forward rate and the value of a forward contract. Implications for corporate managemnent and valuable insights fro option pricing are examined.
- Descriptions of the empirical behavior of exchange rates and its implications for foreign exchange traders, treasurers, and corporate managers. readers examine how inflation-based theories fail to explain exchange rates and how the forward rate is a biased predicator of the future spot rate. Track records of various econometric methods and professional forecasters are reviewed.
- Comprehensive study of when and why the firm can increase its value by hedging foreign exchange risk: how to measure exposure to foreign exchange rates; and how to select the best hedging instrument.
- Economic analysis of the various payment and credit insurance techniques used in international trade, including countertrade.
- Stepwise approach on how to value foreign direct investment projects, with a discussion of generic international taxation systems and their implications for transfer policies, cost of capital models in integrated and segmented markets, and joint venture projects.
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