Laurent L. Jacque, Walter B. Wriston Professor of International Finance & Banking at the Fletcher School, has written a first-rate textbook, appropriate for both the classroom and self-study. Investors would do well to put aside some time to read and learn from it. I suspect it will fill in some crater-sized gaps in their (I’m loath to make this personal and use the pronoun “your”) understanding of investing in the global economy.
At over 700 pages International Corporate Finance: Value Creation with Currency Derivatives in Global Capital Markets (Wiley, 2014) may appear to be a daunting book, best left to aspiring CFOs. But it’s eminently readable.
The book is divided into six parts: the international monetary environment, the foreign exchange market and currency derivatives, international financing, managing foreign exchange risk, cross-border valuation and foreign investment analysis, and managing the multinational financial system. Each chapter concludes with questions for discussion, references, and (in most cases) problems.
Let’s look very briefly at a single issue that is dealt with in the book: currency hedging. We often hear multinational corporations cite foreign currency headwinds as a reason for suboptimal performance. How should these firms handle their foreign currency exposure?
This question is the theme of the fourth part of the book, which “develops a risk-management framework and offers operational guidelines within which currency risk can be (1) consistently hedged across different risk situations and over time, (2) tightly integrated with other types of financial risk such as interest rate and commodity price risk, and (3) managed consistently with the firm’s overall strategic plans so that the financial engineering dimensions of risk hedging are fully integrated with strategic management.” (pp. 399-400) No mean feat.
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