This course is dual-listed with the Evening and
Weekend MBA Program
COURSE NUMBER: MBA/EWMBA
240-11B
IMPORTANT NOTE #1: This course
will have a take-home final exam on Sunday, May 11, 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.
IMPORTANT NOTE #2: This course
requires use of a laptop during the two Sunday classes. If you cannot bring a
laptop to class, do NOT enroll in this course.
COURSE TITLE: Risk
Management via Optimization and Simulation
UNITS OF CREDIT: 1 Unit
INSTRUCTOR: Andy Shogan,
Associate Dean for Instruction
E-MAIL ADDRESS: andy@haas.berkeley.edu
CLASS WEB PAGE LOCATION (HTTP URL): Catalyst
MEETING DAY(S)/TIME: Sunday, March
16 & April 13, 9:00 AM - 5:00 PM
PREREQUISITE(S): Core courses
from Fall A & B and Spring A (or consent of instructor)
CLASS FORMAT: This is a
lecture-based course.
REQUIRED
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 final decision, a manager must combine his/her own
experience and instincts with the information and insights provided by a model.
I emphasize decision models that are widely used in diverse businesses and
industries, models with which all successful managers should be familiar. The
courses primary goals are twofold: to make all students intelligent consumers
of decision models developed by others, and to 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 decades advances
in computer hardware/software and in data collection/storage/retrieval, today's
managers can quickly and inexpensively perform on their desktops what once required
significant investments of time, space, and dollars. Therefore, an important
aspect of this course is the association with each major topic of a piece of
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, MARCH 16
OPTIMIZATION USING EXCEL's SOLVER
The topics covered will include:
What is a Linear Program, and what is a
Nonlinear Program?
Applications of linear programming and
nonlinear programming to production and operations management and to financial
management (including portfolio optimization).
How to use Excels built-in Solver to solve a
linear program or a nonlinear 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, APRIL 13
SIMULATION & RISK MANAGEMENT USING CRYSTAL BALL.
The topics covered will 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
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:
ANDREW W. SHOGAN is the Associate Dean for Instruction at the Haas School of
Business. He is also on the faculty in the