This course examines several advanced topics in international finance. The topics include theoretical models of the determination of spot exchange rates as well as econometric tests of the models. Models of flexible exchange rates and of collapsing fixed exchange rates are considered. Empirical models that predict the timing and magnitude of devaluations are examined. The relation of forward rates to expected future spot rates and the nature of risk premiums in international asset pricing models are considered. Quantification of the gains to international diversification and the nature of investors' home bias are analyzed.
Nomura Professor of International Finance
Professor Hodrick teaches both fundamental and advanced courses in international finance. His expertise is in the valuation of financial assets. His current research explores the empirical implications of theoretical pricing models that generate time-varying risk premiums in the markets for bonds, equities and foreign currencies. He is also a research associate of the National Bureau of Economic Research.