Business, Economics, and Management
BEM/Ec/PS 80. Frontiers in Social Sciences. 1 unit (1-0-0); first term. Weekly seminar by a member of the Caltech Social Sciences faculty to discuss a topic of their current research or teaching at an introductory level. The course can be used to learn more about different areas of study and about undergraduate courses within the Social Sciences. The course will also be useful to those interested in pursuing the BEM, EC or PS options, or participating in research (SURF, for example) under supervision of the Social Science faculty. Graded pass/fail. Instructor: Cvitanic.
BEM 97. Undergraduate Research. Units to be arranged; any term. Prerequisites: advanced BEM and instructor’s permission. This course offers advanced undergraduates the opportunity to pursue research on a business problem individually or in a small group. Graded pass/fail.
BEM 101. Selected Topics in Business Economics and Management. Units to be determined by arrangement with the instructor; offered by announcement. Topics determined by instructor. Instructors: Staff, visiting lecturers.
BEM 102. Introduction to Accounting. 9 units (3-0-6); third term. This course provides the knowledge and skills necessary for the student to understand financial statements and financial records and to make use of the information for management and investment decisions. Topics include: an overview of financial statements and business decisions; the balance sheet, the income statement, and the cash flow statement; sales revenue, receivables, and cash; cost of goods sold and inventory; long-lived assets and depreciation, and amortization; current and long-term liabilities; owners’ equity; investments in other corporations and an introduction to financial statement analysis. Instructor: Ewens.
BEM 103. Introduction to Finance. 9 units (3-0-6); second term. Prerequisites: Ec 11 required; Ma 1 abc recommended (to be familiar with calculus and linear algebra). Finance, or financial economics, covers two main areas: asset pricing and corporate finance. For asset pricing, a field that studies how investors value securities and make investment decisions, we will discuss topics like prices, risk, and return, portfolio choice, CAPM, market efficiency and bubbles, interest rates and bonds, and futures and options. For corporate finance, a field that studies how firms make financing decisions, we will discuss topics like security issuance, capital structure, and firm investment decisions (the net present value approach, and mergers and acquisitions). In addition, if time permits, we will cover some topics in behavioral finance and household finance such as limits to arbitrage and investor behavior. Instructor: Jin.
BEM 104. Investments. 9 units (3-0-6); third term. Prerequisites: Ec 11, BEM 103, some familiarity with statistics. Examines the theory of financial decision making and statistical techniques useful in analyzing financial data. Topics include portfolio selection, equilibrium security pricing, empirical analysis of equity securities, fixed-income markets, market efficiency, and risk management. Instructor: Roll.
BEM 105. Options. 9 units (3-0-6); first term. Prerequisites: One of the following: Ec 122, Ge/ESE 118, Ma 1/103, MA 112a, MA 112b, or instructor’s permission; BEM 103 strongly recommended; some familiarity with differential equations is helpful. An introduction to option pricing theory and risk management in the discrete-time, binomial tree model, and the continuous time Black-Scholes-Merton framework. Both the partial differential equations approach and the martingale approach (risk-neutral pricing by expected values) will be developed. The course will cover the basics of Stochastic, Ito Calculus. Since 2015, the course is offered in the flipped format: the students are required to watch lectures online, while problem solving and case and paper presentations are done in class. Instructor: Cvitanic.
BEM 107. Applied Corporate Finance and Investment Banking. 9 units (3-0-6); third term. Prerequisites: BEM 103. This course builds on the concepts introduced in BEM 103 and applies them to current issues related to the financial management, regulation, and governance of both ongoing corporations and new start-up companies. The fundamental theme is valuation. The course discusses how valuation is affected by, among others, the role of directors, regulation of mergers and acquisitions, and management incentives. Not offered 2019–20.
BEM 109. Fixed-Income and Credit-Risk Derivatives. 9 units (3-0-6); second term. Prerequisites: BEM 105. An introduction to the models of interest rates, credit/default risk, and risk management. The focus is on continuous time models used in the practice of Financial Engineering for pricing and hedging fixed income securities. Two main models for credit risk are considered: structural and reduced form/intensity models. Not offered 2019–20.
BEM 110. Venture Capital. 9 units (3-0-6); second term. Prerequisites: BEM 102, 103. An introduction to the theory and practice of venture capital financing of start-ups. This course covers the underlying economic principles and theoretical models relevant to the venture investment process, as well as the standard practices used by industry and detailed examples. Topics include: The history of VC; VC stages of financing; financial returns to private equity; LBOs and MBOs; people versus ideas; biotech; IPOs; and CEO transitions. Instructor: Ewens.
BEM 111. Quantitative Risk and Portfolio Management. 9 units (3-0-6); second term. Prerequisites: GE/ACM 118, BEM 105, or Ma 112. An introduction to financial risk management. Concepts of Knightian risk and uncertainty; coherent risk; and commonly used metrics for risk. Techniques for estimating equity risk; volatility; correlation; interest rate risk; and credit risk are described. Discussions of fat-tailed (leptokurtic) risk, scenario analysis, and regime-switching methods provide an introduction to methods for dealing with risk in extreme environments. Instructor: Winston.
BEM 112. International Financial Markets. 9 units (3-0-6); second term. Prerequisites: BEM 103 or instructor permission. The course offers an introduction to international financial markets, their comparative behavior, and their inter-relations. The principal focus will be on assets traded in liquid markets: currencies, equities, bonds, swaps, and other derivatives. Attention will be devoted to (1) institutional arrangements, taxation, and regulation, (2) international arbitrage and parity conditions, (3) valuation, (4) international diversification and portfolio management, (5) derivative instruments, (6) hedging, (7) dynamic investment strategies, (8) other topics of particular current relevance and importance. Not offered 2019–20.
BEM 117. Behavioral Finance. 9 units (3-0-6); third term. Prerequisites: Students are recommended (but not required) to take BEM 103 to become familiar with some basic concepts in finance. Much of modern financial economics works with models in which agents are fully rational, in that they maximize expected utility and use Bayes’ law to update their beliefs. Behavioral finance is a large and active field that develops and studies models in which some agents are less than fully rational. Such models have two building blocks: limits to arbitrage, which makes it difficult for rational traders to undo the dislocations caused by less rational traders; and psychology, which provides guidance for the kinds of deviations from full rationality we might expect to see. We discuss these two topics and consider a number of applications: asset pricing; individual trading behavior; the origin of bubbles; and financial crises. Instructor: Jin.
BEM/Ec/ESE 119. Environmental Economics. 9 units (3-0-6); first term. Prerequisites: Ec 11 or equivalent. This course provides a survey from the perspective of economics of public policy issues regarding the management of natural resources and the protection of environmental quality. The course covers both conceptual topics and recent and current applications. Included are principles of environmental and resource economics, management of nonrenewable and renewable resources, and environmental policy with the focus on air pollution problems, both local problems (smog) and global problems (climate change). Instructor: Ledyard.
BEM/Ec 150. Business Analytics. 9 units (3-0-6); first term. Prerequisites: GE/ESE 118 or Ec 122, and knowledge of R. This class teaches how to use very large, cross-media datasets to infer what variables influence choices and trends of economic and business interest. Topics include database management, cleaning and visualization of data, statistical and machine learning methods, natural language processing, social and conventional media, personal sensors and devices, sentiment analysis, and controlled collection of data (including experiments). Grades are based on hands-on data analysis homework assignments and detailed analysis of one dataset. Not offered 2019–20.