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

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