The online version of the Caltech Catalog is provided as a convenience; however, the printed version is the only authoritative source of information about course offerings, option requirements, graduation requirements, and other important topics.

BUSINESS ECONOMICS AND MANAGEMENT

BEM/Ec/SS 20. Scientific Writing and Oral Presentation in the Social Sciences. 6 units (2-0-4); second term. This class provides the opportunity for students to improve their written and oral presentation skills in the social sciences. Students should come prepared with complete drafts of papers from another course or a SURF project, which they will substantially revise and improve in a style typical of peer-reviewed journals in their discipline. These papers must be the students’ original work and must be papers with social science content. An initial introduction to the art of scientific writing will be provided by the staff of the Hixon Writing Center. In addition, each student will work closely with an HSS mentor whose own research is close to the student’s paper topic. Fulfills the Institute scientific writing requirement and the option oral presentation requirement for HSS majors. Instructors: Yariv, Daley.

BEM 102. Introduction to Accounting. 9 units (3-0-6); first, second terms. An introduction to accounting in business. Topics include financial accounting, cost accounting. Instructor: Wang.

BEM 103. Introduction to Finance. 9 units (3-0-6); first term. Prerequisite: Ec 11 required. An introduction to corporate finance. Economic theory is used to study asset valuation and financial decision making in business. Topics include financial decision making under certainty, introduction to valuation of risky assets (stocks and bonds), the corporate investment decision, dividend policy, and the corporate financing decision. Instructor: Bossaerts.

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: Gillen.

BEM 105. Options. 9 units (3-0-6); second term. Prerequisites: BEM 103, some familiarity with statistics. Ec 11 recommended. An introduction to modern option pricing theory. The focus is the valuation of contingent claims. Both American and European options are considered. The binomial and Black-Scholes option pricing models are derived. The theory is also applied to risky debt and portfolio choice. Instructor: J. Zhang.

BEM 106. Competitive Strategy. 9 units (3-0-6); second term. Prerequisite: Ec 11. This course develops concepts appropriate for formulating strategy in a competitive environment, using a combination of case analysis and lectures. The course covers differentiation strategies, positioning to neutralize incumbency advantages, the product life cycle, organizational design as competitive strategy, signaling, cooperation strategies, pricing and price discrimination as competitive strategy, strategic use of option theory, and the war of attrition. Instructor: Snowberg.

BEM 107. Advanced Corporate Finance: Governance, Transacting, and Valuation. 9 units (3-0-6); third term. Prerequisite: 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. Instructor: Cornell.

BEM 109. Fixed-Income and Credit-Risk Derivatives. 9 units (3-0-6); third term. Prerequisite: BEM 105. An introduction to the models of interest rates and credit/default risk. The focus is on continuous time models used in Wall Street practice for pricing and hedging fixed income securities. Two main models for credit risk are considered: structural and reduced form. Instructor: J. Zhang.

BEM 110. Venture Capital. 9 units (3-0-6); second term. Prerequisites: BEM 101, 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: Camerer.

BEM 111. Quantitative Risk Management. 9 units (3-0-6); second term. Prerequisites: ACM/ESE 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 113. Financial Markets Laboratory. 9 units (3-3-3); second term. Prerequisite: BEM 103. Financial economics is rather abstract and mathematical, and its value is difficult to ascertain from merely observing real-world financial markets, which operate in a complex environment where many key variables either remain unobserved or cannot be measured reliably. In this class, students will learn about the theories of asset pricing, options, investments performance evaluation, corporate finance, and banking/insurance through participation in a series of online market games. Grading will be based on a mixture of trading performance, written and oral reports. Instructor: Bossaerts.

BEM 116. Advanced Business Strategy for Technology. 9 units (3-0-6); third term. Prerequisite: BEM 106. This course develops tools to determine strategy for firms facing rapid technological change, great uncertainty, low marginal costs and high fixed costs of production, and short product life cycles. The focus is on firms with high levels of human capital (so-called high-tech firms). Special attention is paid to the product life cycle, patent strategy, pricing, and hiring and retention of talented individuals. Working in teams, students will be asked to formulate strategy in real business situations. Not offered 2012–13.

BEM/Ec 118. Environmental Economics. 9 units (3-0-6); first term. Prerequisite: 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/PS 126. Business and Public Policy. 9 units (3-0-6); first term. Prerequisites: PS 12, Ec 11 or equivalent. This class studies the relationships among business, government, and interest groups as strategic actors in the nonmarket environment. Methods of influencing public policy are analyzed using the tools of modern political theory and economics frameworks. Topics may include media, private collective action, international business, and corporate social responsibility. Two written assignments will be collected and graded each week. Not offered 2012–13.

BEM/Ec 146. Organization Design. 9 units (3-0-6); first term. Prerequisite: Ec 11. An introduction to the analysis, design, and management of organizations with an emphasis on incentives and information. Principles from economics, political science, and game theory will be applied to problems in project and team management, in organizational computing, and in allocating and pricing shared facilities. Instructor: Camerer.

BEM/Ec 185. Political Economy of Corporate Governance. 9 units (3-0-6); third term. Prerequisites: PS/Ec 172. The course covers issues of how firms are organized. Topics include the distribution of power and returns among shareholders, managers, and other stakeholders; the role of law, public policy, and financial markets in constraining or enabling firms to solve the problems they face; the interaction between history, financial market structure, and the ownership of very large firms. Each student is expected to write two substantial papers - drafts will be read by instructor and revised by students. Instructor: Rosenthal.

BEM 190. Undergraduate Research Project. Units to be arranged; any term. Prerequisites: BEM 103, 106, and instructor’s permission. This course offers advanced undergraduates the opportunity to pursue research on a business problem individually or in small groups. Graded pass/fail.