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Business Economics & Management (BEM) Courses (2020-21)

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): first term. This course combines accounting and finance in a dynamic, user-oriented approach. The goal is to enable students to understand what financial statements are (sources of information about a company), what they are not (facts devoid of interpretation or management influence), and how to critically understand and analyze them. The course will utilize actual SEC filings for several companies, across a variety of industries, through which the students will be exposed to important accounting concepts. Instructor: McAniff.
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 112 a, MA 112 b, 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, bi-nomial 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. Corporate Finance. 9 units (3-0-6): third term. Prerequisites: BEM 103. The main objective of the course is to develop insight into the process by which firms can create value for their shareholders. We will study major corporate decisions from the perspective of the firm with an emphasis on the interaction of the firm with financial markets: quantitative project evaluation for investment, choice between borrowing and issuing stock, dividend policy, organizational form (for example, mergers and acquisitions). Theory, empirical evidence, and case analysis all play significant roles in the course. Topics include discounted cash flow models, risk and return, capital asset pricing model, capital market efficiency, capital structure and the cost of capital and dividend policy. Instructor: Ewens.
BEM 108. Mathematical Models in Fintech. 9 units (3-0-6): third term. Prerequisites: Some knowledge of game theory and optimization is helpful, BEM 103 Introduction to Finance is recommended, and a calculus-based course in probability is required. In this course we will go over recent works on topics broadly contained in the newly emerging field of Fintech. In particular, the topics include mathematical modeling of strategic actions of agents interacting via a blockchain technology, via crowdfunding platforms, and via online investment platforms ("robo-advisors"). Instructor: Cvitanic.
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 2020-21.
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). Not offered 2020-21.

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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.