INTERNATIONAL FINANCIAL MANAGEMENT
BEKAERT & HODRICK, 2nd EDITION
Enhanced Exam-Oriented Study Guide • 2026
Original educational companion
Created from the public Stuvia preview and public textbook/course structure. It does not reproduce the paid test
bank, protected questions, answer keys, or instructor materials.
International Financial Management — Bekaert & Hodrick 2e • Enhanced Study Guide 2026 Page 1
, How to Study International Financial Management
The 2nd-edition structure covers 21 chapters across globalization/foreign exchange, parity and exchange-rate determination,
international capital markets, international corporate finance, ongoing operations, and foreign-currency derivatives. The public Stuvia
preview confirms Chapter 1 themes such as globalization, free trade, outsourcing, derivatives, licensing, franchising, joint ventures,
and corporate governance. ■cite■turn0search0■turn0search2■
For calculation questions, write the quote convention first, identify the home/foreign currency, then keep units consistent. Most errors
in international-finance problems are direction errors rather than difficult arithmetic.
Exam task Fast method
Exchange-rate conversion Write the quote as units of currency A per unit of B; multiply/divide only after labeling it.
Forward premium/discount Compare forward rate with spot rate using the same quote convention.
Interest-rate parity Connect spot, forward and interest rates; check whether the result implies arbitrage.
PPP Compare relative inflation and expected currency movement.
Capital budgeting Translate foreign cash flows consistently, then discount at the appropriate required return.
Hedging Identify exposure, direction, horizon and hedge instrument before calculating.
1. Globalization and the Multinational Corporation
Globalization expands cross-border trade, investment, production and financial integration. Multinational corporations (MNCs) face
both opportunities and additional political, currency, legal and operational risks.
Know the distinction among outsourcing (contracting a function to a specialist), licensing (permission to use intellectual property for a
fee), franchising (broader operating/business-format relationship), and joint ventures (shared ownership/control).
Corporate governance concerns how shareholders, managers and other stakeholders are governed; agency problems arise when
managers' incentives differ from owners' interests.
Free trade tends to exploit comparative advantage; tariffs, quotas and non-tariff barriers are protectionist tools.
2. The Foreign Exchange Market
Foreign exchange (FX) is the market for exchanging currencies. Know spot versus forward transactions, bid/ask spreads, dealers,
banks, corporations, central banks and institutional investors.
Direct and indirect quotes must be read carefully. If USD/EUR means dollars per euro, a rise means the euro has appreciated against
the dollar.
Triangular arbitrage exists when cross-rates among three currencies are inconsistent. The arbitrageur buys the underpriced currency
path and sells the overpriced path.
Spot transactions settle quickly; forward contracts lock an exchange rate for a future date.
3. Forward Markets and Transaction Exchange Risk
Transaction exposure arises when contracted foreign-currency cash flows change in home-currency value before settlement.
A forward hedge fixes the future exchange rate. A money-market hedge uses borrowing/lending in relevant currencies to synthetically
lock the value.
Exporter receiving foreign currency is hurt by foreign-currency depreciation; importer paying foreign currency is hurt by appreciation.
Always state whose perspective you are using before deciding whether a currency move is favorable.
4. The Balance of Payments
The balance of payments records economic transactions between residents of a country and the rest of the world.
Major accounts include current, capital and financial components. Goods/services trade and income flows belong to the current
account; cross-border investment flows are recorded in the financial account.
International Financial Management — Bekaert & Hodrick 2e • Enhanced Study Guide 2026 Page 2
BEKAERT & HODRICK, 2nd EDITION
Enhanced Exam-Oriented Study Guide • 2026
Original educational companion
Created from the public Stuvia preview and public textbook/course structure. It does not reproduce the paid test
bank, protected questions, answer keys, or instructor materials.
International Financial Management — Bekaert & Hodrick 2e • Enhanced Study Guide 2026 Page 1
, How to Study International Financial Management
The 2nd-edition structure covers 21 chapters across globalization/foreign exchange, parity and exchange-rate determination,
international capital markets, international corporate finance, ongoing operations, and foreign-currency derivatives. The public Stuvia
preview confirms Chapter 1 themes such as globalization, free trade, outsourcing, derivatives, licensing, franchising, joint ventures,
and corporate governance. ■cite■turn0search0■turn0search2■
For calculation questions, write the quote convention first, identify the home/foreign currency, then keep units consistent. Most errors
in international-finance problems are direction errors rather than difficult arithmetic.
Exam task Fast method
Exchange-rate conversion Write the quote as units of currency A per unit of B; multiply/divide only after labeling it.
Forward premium/discount Compare forward rate with spot rate using the same quote convention.
Interest-rate parity Connect spot, forward and interest rates; check whether the result implies arbitrage.
PPP Compare relative inflation and expected currency movement.
Capital budgeting Translate foreign cash flows consistently, then discount at the appropriate required return.
Hedging Identify exposure, direction, horizon and hedge instrument before calculating.
1. Globalization and the Multinational Corporation
Globalization expands cross-border trade, investment, production and financial integration. Multinational corporations (MNCs) face
both opportunities and additional political, currency, legal and operational risks.
Know the distinction among outsourcing (contracting a function to a specialist), licensing (permission to use intellectual property for a
fee), franchising (broader operating/business-format relationship), and joint ventures (shared ownership/control).
Corporate governance concerns how shareholders, managers and other stakeholders are governed; agency problems arise when
managers' incentives differ from owners' interests.
Free trade tends to exploit comparative advantage; tariffs, quotas and non-tariff barriers are protectionist tools.
2. The Foreign Exchange Market
Foreign exchange (FX) is the market for exchanging currencies. Know spot versus forward transactions, bid/ask spreads, dealers,
banks, corporations, central banks and institutional investors.
Direct and indirect quotes must be read carefully. If USD/EUR means dollars per euro, a rise means the euro has appreciated against
the dollar.
Triangular arbitrage exists when cross-rates among three currencies are inconsistent. The arbitrageur buys the underpriced currency
path and sells the overpriced path.
Spot transactions settle quickly; forward contracts lock an exchange rate for a future date.
3. Forward Markets and Transaction Exchange Risk
Transaction exposure arises when contracted foreign-currency cash flows change in home-currency value before settlement.
A forward hedge fixes the future exchange rate. A money-market hedge uses borrowing/lending in relevant currencies to synthetically
lock the value.
Exporter receiving foreign currency is hurt by foreign-currency depreciation; importer paying foreign currency is hurt by appreciation.
Always state whose perspective you are using before deciding whether a currency move is favorable.
4. The Balance of Payments
The balance of payments records economic transactions between residents of a country and the rest of the world.
Major accounts include current, capital and financial components. Goods/services trade and income flows belong to the current
account; cross-border investment flows are recorded in the financial account.
International Financial Management — Bekaert & Hodrick 2e • Enhanced Study Guide 2026 Page 2
