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.