COURSE NUMBER: EWMBA 240-11A

COURSE NUMBER: EWMBA 240-11A* (this course is cross-listed)

IMPORTANT NOTE #1: This course will have a take-home final exam on Sunday, March 13, 11:00 AM - 5:00 PM. If you are unable to take the exam both on this data and at this time, do NOT enroll in this course. Although you must take the exam on March 13, the exam will be distributed and returned electronically, so you may take the exam from anywhere in the world from which you can access e-mail or bSpace.

IMPORTANT NOTE #2: This course requires use of a laptop during the two Sunday classes. If you cannot bring a laptop to class (or at least sit next to someone who does bring a laptop), do NOT enroll in this course.

COURSE TITLE: Risk Management via Optimization and Simulation

UNITS OF CREDIT: 1 Unit

INSTRUCTOR: Andy Shogan

E-MAIL ADDRESS: andy@haas.berkeley.edu

CLASS WEB-PAGE LOCATION: bSpace

MEETING DAY(S)/TIME: Sunday, February 13 & February 27, 9:00 AM - 5:00 PM

PREREQUISITE(S): Core courses (or consent of instructor).

CLASS FORMAT: This will be a lecture-based course.

REQUIRED READINGS: There is a textbook.

BASIS FOR FINAL GRADE: 2 Personal Problem Sets (10%), 2 Team Assignments (40%), Take-home Final Exam (50%)

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
This course surveys how to formulate, solve, and interpret mathematical models that assist a manager in his/her decision making. I use the word assist because a model does not make a decision for a manager. Before making a decision, a manager must combine his/her own experience and instincts with the information and insights provided by a model. The course covers decision models that are widely used in diverse businesses and industries, models with which all successful managers should be familiar. The course has two primary goals: make all students intelligent consumers of decision models developed by others, and motivate many students to be suppliers of decision models to their colleagues at work. Until recently, decision models were for experts only. However, given the past decade’s advances in computer hardware/software and in data collection/storage/retrieval, today's managers can quickly and inexpensively perform on their laptops what once required significant investments of time, space, and dollars. Therefore, an important aspect of this course is the use of Risk Solver Platform (http://www.solver.com/platform/risk-solver-platform.htm), integrated software that you own, learn, and apply during the course (and hopefully afterwards!).

Below is a summary of the courses two major topics and the associated software.

SUNDAY, FEB 13
OPTIMIZATION USING EXCEL's SOLVER
Topics covered include:

What is a Linear Program, and what is an Integer Linear Program?
Applications of linear programming and integer linear programming to production and operations management and to financial management.
How to use Excels built-in Solver to solve a linear program or an integer linear program. (That is, although spreadsheet software such as Excel was designed initially to answer the question "What if?", Solver allows us to answer the question "What's best?".)

SUNDAY, FEB 27
SIMULATION & RISK MANAGEMENT USING CRYSTAL BALL.
Topics covered include:

Why managers should confront uncertainties instead of ignoring them.
How a manager can get into trouble by not understanding the Flaw of Averages. (That is, the mean of a function of random variables does not in general equal the function of the means of the random variables.)
The world is not always Normal! (That is, in addition to the Normal Probability Distribution, there are other probability distributions with which a manager should be familiar.)
What is a Simulation?
How Crystal Ball, an add-in to Excel, can be used to conduct a simulation within a spreadsheet.
What is risk, and how can it be measured and managed?
The trade-off between return and risk. (For example, the best decision might not be the decision that maximizes profit but instead might be a decision that has a lower-than-maximum profit but a significantly lower downside risk.)
Applications of simulation to production management, developing a "business plan" for a new product, obtaining portfolio insurance via a put option, adding "leverage" to a portfolio via a call option, yield management in the airline and hotel industries, and Value-at-Risk.

BIOGRAPHICAL SKETCH:
ANDY SHOGAN joined the Haas School’s faculty in 1974 after receiving an A.B. in Mathematics from Princeton and a Ph.D. in Operations Research from Stanford. At the Haas School, Andy served several times as chair of the Operations & Information Technology Group, and, during the period 1991-2007, he served as the Haas School’s Associate Dean for Instruction. Although now retired, Andy still teaches at Haas and also performs special projects for Haas (most recently in Vietnam and Saudi Arabia). In 2007, Andy was awarded the Chancellor’s Distinguished Service Award for his long-time service to both Haas and the University. For his teaching, Andy has twice received the Haas School’s Cheit Award for Teaching Excellence (once from the Full-Time MBA students and once from the EWMBA students), and he has received the campus-wide Distinguished Teaching Award from the University’s faculty. In addition to being a Haas faculty member, Andy is a Visiting Professor at Switzerland’s Lorange Institute of Business (formerly GSBA Zurich) and Denmark’s AVT Business School, where he regularly teaches operations management and spreadsheet modeling in the schools’ Executive MBA Programs, and where he has twice received awards for teaching excellence. Andy has taught a variety of executive education programs in the United States, China, Thailand, Taiwan, Jamaica, Mexico, and Switzerland. In 1988, his textbook Management Science was published by Prentice-Hall. Andy and his wife of 38 years are both natives of Pittsburgh, PA, now reside in Orinda, CA, and have 3 sons, 2 daughters-in-law, and 1 grandson & 1 granddaughter.