COURSE NUMBER: MBA240.11A
This course is cross-listed with
the EWMBA Program.
IMPORTANT NOTES
1. This course has a take-home final exam on Sunday,
November 24, 8:00 AM – 8:00 PM. Although you have a 12-hour period to
finish the exam, it is designed to finish in 4-6 hours. You may work on the
exam at home or on campus, and you may use any resource except another person.
The exam is distributed and submitted electronically, so you can take the exam
from anywhere in the world. Therefore, no exceptions are granted for taking the
exam either earlier or later. Please plan accordingly.
2. This course requires use of a laptop during the 2 Sunday classes.
Please plan accordingly.
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, October 13 & Sunday, November 3, 9:00
AM - 5:00 PM
Please note the unorthodox
nature of this course, which meets all day on two Sundays (10/13 & 11/3).
To earn a passing grade, you must attend BOTH class sessions in their entirety.
PREREQUISITE(S): Fall Semester 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 on Sunday, 4/14 (50%). In prior
offerings of this course, students have indicated that the workload was
appropriate for a 1-unit course.
ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
In many MBA programs (but not Haas), this course is part of the core
curriculum and has the title of “Decision Models” or some variant thereof. This course surveys how to formulate, solve,
and interpret mathematical models – optimization and simulation – that assist a
manager in his/her decision making. 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 course’s two major topics:
SESSION #1 (Sunday, October 13)
OPTIMIZATION USING RISK SOLVER PLATFORM.
Topics covered include:
·
What is a Linear Program, and what is an Integer
Linear Program?
·
Applications of linear programming and integer
linear programming to operations management and to financial management.
·
How Risk Solver Platform, an add-in to Excel,
can be used to solve a linear program or an integer linear program. (Although
Excel was designed initially to answer the question "What if?", Risk Solver Platform enables Excel to answer the
question "What's best?".)
SESSION #2 (Sunday, November 3)
SIMULATION & RISK MANAGEMENT USING RISK SOLVER
PLATFORM.
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 simulation (sometimes referred to as
Monte Carlo simulation)?
·
How Risk Solver Platform, 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 expected
profit but instead might be a decision that has a lower-than-maximum expected
profit but a significantly lower downside risk.)
·
Applications of simulation to operations
management, developing a "business plan" for a new venture, 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 41 years are both natives of Pittsburgh,
PA, now reside in Orinda, CA, and have 3 sons, 2 daughters-in-law, and 2
grandsons & 1 granddaughter.