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 10/26, 6:00
AM – 8:00 PM. Although you have a 14-hour period to finish the exam, it is
designed to finish in 5-7 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, 9/7 and 9/28,
9:00 AM - 5:00 PM
Please note the unorthodox nature
of this course, which meets all day on 2 Sundays (9/7 and 9/28). To earn a
passing grade, you must attend BOTH class sessions in their entirety.
PREREQUISITE(S): Core courses (or
consent of instructor)
CLASS FORMAT: This is a
lecture-based course.
REQUIRED READINGS: There is a textbook.
BASIS FOR FINAL GRADE: 4 Team Assignments
(50%), and an individual Take-home Final Exam on Sunday, 10/26 (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 in the core curriculum and
has the title of “Decision Models”, “Business Analytics”, or some variant
thereof. More specifically, among the 18 business schools listed in 2013
in the Top-20 by both Business Week
and U.S. News & World Report,
this course is a required core course in 7 of the 18 schools, is on a menu of
required core courses (take x out of y courses) in 3 of the 18 schools, and
is an elective in 8 of the 18 schools (including Haas).
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!).
Important
Note for Mac Users: If you are a Mac user, please note that there is NOT a Mac
version of Risk Solver Platform (RSP).
Alternatives for Mac users enrolled in this course are the following:
·
To use RSP on a Mac, you must install Microsoft Windows, either in a dual-boot setup on your hard disk, or
running under VM (virtual machine) software such as VMWare
Fusion or Parallels. After Windows
is installed, you can install Microsoft Office (or just Excel)
2013, 2010, 2007, or even 2003. For more details,
visit and read www.solver.com/using-frontline-solvers-macintosh.
·
Borrow a PC to use during
this course.
·
Use the Haas Computer
Center’s license for RSP – either in the labs in S300 & S300T or
remotely (e.g., from home) on the terminal server. Detailed instructions
will be provided at the 1st class.
Below is a summary of the course’s two
major topics:
SESSION #1 (Sunday, 9/7)
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, 9/28)
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 has been a Visiting Professor in
the Executive MBA Program at Switzerland’s Lorange Institute of Business
(formerly GSBA Zurich) and is now a Visiting Professor in the Executive MBA
Program at Denmark’s AVT Business School.
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 42 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.