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,
April 14, 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, February 24 & Sunday,
March 17, 9:00 AM - 5:00 PM
Please
note the unorthodox nature of this course, which meets all day on two Sundays (2/24
& 3/17). 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:
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 course’s two major topics:
SESSION
#1 (Sunday, February 24)
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, March 17)
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 40 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.