Wipplinger, Evert

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Financ Mark Portf Manag (2010) 24: 215–216DOI 10.1007/s11408-010-0131-0B O O K R E V I E WPiet Sercu: International FinancePrinceton University Press, 2009Evert WipplingerPublished online: 23 April 2010© Swiss Society for Financial Market Research 2010International Finance by Piet Sercu is the most comprehensive textbook on the fi-nancing, transactional, and risk management side of international trade and invest-ment currently available. It finds its origins in a previous book by Uppal and Sercu(1995), International Financial Markets and the Firm. Much has changed since pub-lication of the previous volume: electronic trading is now prevalent and the Euro hasreplaced many European currencies. These circumstances, among others, are coveredin the new book, justifying a review of it in this issue of FMPM. Compared to manyother textbooks, this one excels at focusing on the topic at hand and not merely pro-viding a corporate or derivative textbook with some international flavor added. Thebook provides more than ample material for courses on financial markets and busi-ness finance. All topics are illustrated with myriad examples and each chapter hasreview questions, now a standard feature of textbooks. The homepage accompany-ing the book provides additional information, including solutions to the assignments.Each chapter ends with a “CFO’s Summary,” which is a recap of the chapter from apractitioner’s viewpoint that students may find especially appealing.The book’s introductory section provides a brief macroeconomic synopsis of whyinternational finance is relevant and which mechanisms affect international equilib-riums. Part 2 introduces the instruments available to participants in international fi-nancial markets. A chapter is devoted to spot markets and the available derivatives.Here, like in almost every other textbook on derivatives, currency futures, forwards,swaps, options, and their pricing are covered. Because this book is focused on han-dling currency contracts, the author goes into great detail on how these contracts arestructured, traded, and quoted in practice. Especially interesting for future marketparticipants is the discussion on taxation and transaction costs. Part 3 deals with theE. Wipplinger ()Swiss Institute of Banking and Finance, University of St. Gallen, St. Gallen, Switzerlande-mail: evert.wipplinger@unisg.ch216 E. Wipplingertime-series properties of exchange rates and provides a thorough discussion on theeconometric side of modeling exchange-rate risk and exposure. Sercu also providesgenuine statistical results on purchasing power parity tests and the forecasting powerof models. The author shows both sides of the coin: e.g., that purchasing power parityis found to hold, at best, in the long run and that forecasting ability is hotly debated.In later chapters, the book focuses on how and why hedging should take place andthe modalities of the accounting aspects. The final part of the book takes a differ-ent tack from the rest of it in that instead of dealing mainly with exchange risk, itemphasizes international investment decisions by companies. The author covers a di-versity of topics, ranging from the mechanism of issuing loans, debt, and equities tothe workings of the relevant market environments to budgeting and taxation in cross-border situations. Several chapters explain how to derive investment decisions in aninternational framework.International Finance covers a multiplicity of issues having to do with trading,investing, and operating in international markets. The most intriguing feature of thebook is that Sercu manages to merge theoretical foundations, such as macroeconomictheory and risk premiums, with the ins and outs of international markets. This willmake the book especially appealing to future practitioners interested in a deeper un-derstanding of their chosen career.

Piet Sercu: International Finance: Princeton University Press, 2009

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Piet Sercu: International Finance: Princeton University Press, 2009

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