Introduction to Foreign Exchange Rates

As managers expand their international business operations, they are confronted by the puzzling and vexing world of foreign exchange (FX) rates. This book is a resource that will help you quickly understand and navigate the FX market. It can be used as an introductory module in a course in international finance, whether the course is oriented to international markets, international investments, or international corporate finance.

After an introduction to foreign exchange (FX) rates, you'll learn the important topic FX rate valuation. This is important for to understand when an FX rate is incorrectly valued, as this situation may have a bearing on strategic decisions to operate or invest overseas. This book also covers the mechanics of forward FX contracts, and their use in managing the risk of future foreign currency cash flows. In the case study included, the case company is faced with FX exposure in the revenues of a proposed new foreign customer. The decision-maker applies the material to evaluate whether the FX rate is over-, under-, or correctly valued. The final decision is whether to expand sales to the foreign market and whether to hedge the FX risk.

About the Author

Thomas J. O'Brien has been in the Finance Department at the University of Connecticut since 1986. Education: Ph.D., University of Florida, 1980; MBA, University of Pennsylvania, 1972; A.B., Davidson College, 1969.

In 2013, Business Expert Press published a new version of Professor O'Brien's international finance text, in two modules: The first covers FX rates, FX valuation, and FX transaction exposure, and is suitable for courses for international investments, financial markets, or corporate finance. The second covers two topics in international corporate finance: FX risk management and international capital budgeting. The new version also contains three cases.