Task 1.3: international finance

ACTIVITY BRIEF FOR ASSESSMENT 1

ACADEMIC YEAR 2022 – 2023 TERM III

Course MBA303 International Finance (3CH/4ECTS)

Instructor Pete Nicolau [email protected]

Participation in all assessment activities stated in this document is required. An overall course total of 70

points is required to pass the course. Due dates and times are always in Geneva time.

Assessment Choose an assessment category

Description Due date and
time

Weight of
course total

Task 1.1: The International Monetary System

Assessment type: Discussion forum

Description: Provide brief views on the International Monetary
System based on a current issue.

For further details of this assessment task, please consult the activity
description on the relevant week of the course site.

24 Mar. 23

17:00

5%

Task 1.2: The Balance of Payments

Assessment type: Discussion forum

Description: Provide brief views on the Balance of Payments based
on a current issue

For further details of this assessment task, please consult the activity
description on the relevant week of the course site.

25 Apr. 23

17:00

5%

Task 1.3: The Foreign Exchange Market and Exchange Rate
Determination

Assessment type: Written assignment

Description: Written assignment of 2,500 words on the Foreign
Exchange Market and Exchange Rate Determination.

See sections below for further details.

12 May. 23

17:00

30%

INSTRUCTIONS

Main task

QUESTION

The Swiss National Bank projects losses on foreign currency transactions of CHF131

billion, with another CHF1 billion in losses on positions held in Swiss francs.

Switzerland’s central bank racked up estimated losses of 132 billion Swiss francs ($143 billion) for

2022—its biggest loss since 1907, and equal to around 18% of GDP.

The Swiss National Bank (SNB) projects losses on foreign currency transactions of CHF131 billion, with

another CHF1 billion in losses on positions held in Swiss francs. SNB made a small valuation gain of

CHF400 million on its gold holdings.

The SNB, an august institution, has been accused of keeping a lid on the strength of the franc to

support Switzerland’s export-centric economy. However, Switzerland saw gains in the value of the franc

last year, due in part to a series of interest rate hikes designed to control imported inflation.

SNB’s record losses are not an isolated occurrence. Other central banks are under a cloud too. In the

first quarter of 2022, the US Federal Reserve Bank showed $330 billion in unrealized losses. “The Fed

followed that up with a [summer] statement saying that it expected to run at a loss for several years,

booking between $60 billion to 180 billion in deferred assets, which is essentially an IOU to the

government,” says Modulus CEO Richard Gardner. “In other words, a loss.”

However, it is difficult to normalize SNB’s losses, given fundamental differences in both policy and

position between it and the US Fed. “In the US, the issue is that it paid more interest than it received in

income,” Gardner explains. “With the Swiss, the majority of the losses were due to forex positions.”

The Swiss loss also represents a much greater portion of the country’s GDP than the Fed’s loss relative

to US GDP. Definitive figures will be released on March 6. The annual report will be published on March

22.

Are SNB’s losses a harbinger of things to come? Several other national banks are sitting on losses,

including the central banks of Australia, Belgium, Canada, England and Japan. The European Central

Bank is also warning of losses.

(Accessed from https://www.gfmag.com/magazine/february-2023/switzerland-national-bank-historic-loss)

REQUIREMENT

Discuss the above scenario, clearly providing your views on the implications of the issues on hand on the foreign

exchange market and international monetary systems over the short, medium and long term.

FORMAT

Your submission must meet the following formatting requirements:

• Submit one file(s) only.

• Required file format for main submission: PDF or Microsoft Word

• Additional file format for additional deliverables: NONE

• Additional file requirements: NONE

Other details:

• Font size 12

• Double-spaced

• Number of words: 2,500 (+/- 10%)

All referencing and citations require Harvard referencing style.

LEARNING OUTCOMES

1. Evaluate recent trends and events in international finance using the appropriate financial theories;

2. Critically evaluate the impact of financial globalization on the market capitalization of a company;

3. Assess the nature of the relationships between national stock markets, currency markets and interest

rate markets

ASSESSMENT CRITERIA

Criteria Accomplished
(A)

Proficient
(B)

Partially proficient
(C)

Borderline
(D)

Fail (F)

Problem
identification

(20%)

The business
issue has been
correctly
identified, with a
competent and
comprehensive
explanation of
key driving forces
and
considerations.
Impact on
company
operations has
been correctly
identified.
Thorough
analysis of the
issue is
presented.

The student
correctly
identified the
issue(s), taking
into account a
variety of
environmental
and contextual
drivers. Key
case
information has
been identified
and analyzed.

The student correctly
identified the case
(issues), considering
obvious
environmental/contextual
drivers. There is
evidence of analysis, but
it lacks depth.

The student
correctly
identified the
issue(s) but
analysis was
weak. An
absence of
context – the
work is
basically
descriptive
with little
analysis.

The student
failed to
correctly
identify the
issue(s);
analysis was
incorrect or too
superficial to be
of use;
information was
misinterpreted.

Information
gathering

(40%)

The student
showed skill in
gathering
information and
analyzing it for
the purposes of
filling the
information gaps
identified.
Comprehensive
and relevant.

Relevant
information
gaps were
identified and
additional
relevant
information
was found to
fill them. At
least two
different types
of sources
were used.
The student
demonstrates
coherent
criteria for
selecting
information but
needs greater
depth.

The student correctly
identified at least one
information gap and
found relevant
information, but which
was limited in scope.
Some evidence of sound
criteria for selecting
information but not
consistent throughout.
Needs expansion.

An information
gap was
identified and
the student
found
additional
information to
fill it. However,
this was
limited in
scope. Weak
criteria for the
selection of
necessary
information.

Information was
taken at face
value with no
questioning of
its relevance or
value. Gaps in
the information
were not
identified or
were incorrect.

Conclusions

(20%)

The student
evaluated,
analyzed,
synthesized all
information
provided to create
a perceptive set
of conclusions to
support the
decisions and
solutions.

The student
evaluated,
analyzed and
synthesized to
create a
conclusion(s)
which support
decisions and
solutions.

The student reached
conclusions, but they
were limited and
provided minimal
direction for decision-
making and solutions.

The
conclusion
was
reasonable
but lacked
depth and
would not be a
basis for
suitable
strategy
development.

The student
formed a
conclusion, but
it was not
reasonable. It
was either
unjustified,
incorrect or
unrelated to the
case in hand.

Solutions

(20%)

The student used
problem solving
techniques to
make thoughtful,
justified decisions
about difficult and
conflicting issues.
A realistic
solution was
chosen which
would provide

The student
used problem
solving
techniques to
make
appropriate
decisions
about complex
issues.
Relevant
questions were

The student used
problem-solving
techniques to make
appropriate decisions
about simpler issues.
The solution has limited
benefit but does show
understanding of
implications of the
decision. Alternatives

The student
used problem
solving
techniques to
make
decisions
about simpler
issues but
disregarded
more complex
issues.

The student
formed a
conclusion, but
it was not
reasonable. It
was either
unjustified,
incorrect or
unrelated to the
case in hand.

maximum benefit
to the company.
Alternative
solutions were
explored and
ruled out.

asked and
answered. A
realistic
solution was
chosen.
Alternatives
were identified,
explored and
ruled out.

were mentioned but not
explored.

Implications of
the decision
were not
considered.
Alternatives
were not
offered.

ADDITIONAL INFORMATION

N/A