COURSE NUMBER: MBA 240-11B

This course is cross-listed with the EWMBA Program

IMPORTANT NOTE #1: This course will have a take-home final exam on Sunday, May 9, 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. Although you must take the exam on May 9, the exam will be distributed and returned electronically, so you may take the exam from anywhere in the world from which you can access e-mail or bSpace.

IMPORTANT NOTE #2: This course requires use of a laptop during the two Sunday classes. If you cannot bring a laptop to class (or at least sit next to someone who does bring a laptop), do NOT enroll in this course.

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, March 7 & April 11, 9:00 AM - 5:00 PM

PREREQUISITE(S): Core courses from Fall A & B and Spring A (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 (50%)

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES: VIDEO

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 7
OPTIMIZATION USING EXCEL's SOLVER

Topics covered include:

· What is a Linear Program, and what is an Integer Linear Program?

· Applications of linear programming and integer linear programming to production and operations management and to financial management.

· How to use Excels built-in Solver to solve a linear program or an integer linear 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 11
SIMULATION & RISK MANAGEMENT USING CRYSTAL BALL.
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 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 on the faculty of the Haas School's Operations and Information Technology Group. During the years 1991-2007, Andy served as the Haas School’s Associate Dean for Instruction. Andy 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. Andy has twice received the Haas School’s Cheit Award for Teaching Excellence -- once from the MBA students and once from the EvMBA students -- and he has received the Distinguished Teaching Award from the University's faculty. Andy has designed and taught a variety of executive education programs for companies in the United States, China, Thailand, Taiwan, Jamaica, Mexico, and Switzerland.