Semester | Spring Semester, 2018 | ||
Department | Junior Class A, Department of International Business Junior Class B, Department of International Business Senior Class A, Department of International Business Senior Class B, Department of International Business | ||
Course Name | Simulation Modeling with Business Applications | ||
Instructor | FU YEE-TIEN | ||
Credit | 3.0 | ||
Course Type | Elective | ||
Prerequisite |
Course Objective |
Course Description |
Course Schedule |
Please see the attached. Course Schedule Session 1 Introduction to Financial Modelling and Spreadsheet Essentials Frameworks and concepts covered = • Course mechanics o Strengths and weaknesses of spreadsheets o Six golden rules of spreadsheet design • Spreadsheet essentials Session 2 Measuring Risk Frameworks and concepts covered = Preparation Read “Modern Risk Measurement”. • Estimating betas with regression analysis • Using daily, weekly, and monthly data o With regression analysis o With pivot tables Sessions 3 and 4 Portfolio Optimization Frameworks and concepts covered • Mean-variance portfolio selection Preparation Students who are not familiar with Solver need to read the following sections of Session 5 Advanced risk analysis Frameworks and concepts covered • Monte-Carlo simulation Preparation Students who are not familiar with @Risk should read "Allowing for Risk in Spreadsheet Models--A Tutorial on Risk Analysis with @Risk", and Chapter 9 of Winston and Albright before class. Session 6 Workshop Assignment on Portfolio Optimization For this session, we will meet directly at the computer laboratory. The workshop assignment will be distributed, and the students will work in pairs on the assignment with the help of the professor and tutors. Frameworks and concepts covered The assignment will build on the concepts covered in Sessions 3 and 4. Specifically, the students will have to build a Solver model to deal with a portfolio management situation. Preparation Students who are not familiar with Solver need to read the following sections of Albright and Winston before class: 3.1, 3.2, 3.3, 3.4, 3.7, 3.8, 4.1, 4.7, 6.1, 6.2, 6.3, 7.1, and 7.2. Session 7 American Option Valuation Frameworks and concepts covered • Review of options Session 8 Workshop Assignment on Real Option Valuation with Binomial Trees For this session, we will first have a short lecture and then we will move to the computer laboratory. The workshop assignment will be distributed, and the students will work in pairs on the assignment with the help of the professor and tutors. Frameworks and concepts covered • Real options Session 9 Black-Scholes Formula and Exotic Option Valuation Frameworks and concepts covered • Black-Scholes formula Session 10 Real Option Valuation with Monte-Carlo Simulation For this session, we will first have a guest speaker and then we will move to the computer laboratory to work on real-option valuation with Monte-Carlos Simulation. Frameworks and concepts covered Real Option Valuation with Monte-Carlo Simulation |
Teaching Methods |
Teaching Assistant |
TBA |
Requirement/Grading |
Please see the attached. COURSE TEAM PROJECTS Course projects will be completed in teams, usually of 4 or 5 members. You will be assigned to one team for the first half of the term, up to midterm week. And then you will be assigned to a different team for the second half of the course. Projects deliverables will be accepted for instructor’s improvement suggestions. Part of the grading process is a peer review of the project. These projects are expected to be professional work. Presentation is important. At a minimum:
(correctly) and think about how to present them in a meaningful way. This will be an intermediate deliverable for this project. More importantly, I want to see the performance report directly tied to the spreadsheet. If I update numbers on the spreadsheet, the performance report is updated as well. From there, develop bells and whistles to make the spreadsheet and report more usable and user-friendly. The deliverable is the spreadsheet and the report that the spreadsheet creates.
For all cases, peer evaluations (of part of the project) are required. A 5-point penalty will be assigned for a late (by less than 24 hours) peer evaluation. A 10-point penalty will be assigned after 24 hours. Needless to say, this is a critical component of this class. |
Textbook & Reference |
Thefollowingtextbookwillbeutilizedthroughouttheterm:JohnCharnes, Modeling Financial Derivatives with Excel and Crystal Ball. The second edition of this book is available in pdf format for free from the electronic Wiley Library through NCCU library. Severaltextbooks,however,canbeusedtocomplementthematerialsinthe course pack: • “Spreadsheet Modeling and Applications”, by Albright and Winston, Thomson/Duxbury Press 2005. This is the textbook covering the basics of modelling as well as the basics of the prerequisite tools Solver and @Risk. Students should read Chapters 3 and 9 of this book before Sessions 3 and 5, respectively. • “Principles of Corporate Finance”, by Brealey, Myers, and Allen, 10th ed., 2010. This is the textbook for the prerequisite core course "Corporate Finance" and covers the basic financial frameworks that are required in the course. • “Options, Futures and Other Derivatives”, by John C. Hull, Sixth Edition, Prentice Hall 2006. This textbook is recommended for other complementary elective courses such as “Derivatives” and “Financial Engineering and Risk Management”. The book is particularly useful to understand the theoretical concepts related to option valuation. • “VBA for modelers”, by Christian Albright, Second Edition, Palisade 2006. This textbook provides a step-by-step guide to using VBA to build decision- support systems with Excel. In addition, the following entertaining, easy-to-read, and informative New York Times bestseller gives a good overview of some of the characters and strategies in the quantitative finance industry: • “The Quants: How a small band of maths wizards took over Wall Street and nearly destroyed it”, by Scott Patterson, Random House Business Books 2010. • “Operations Research, Tenth Edition”, by Taha is highly recommended for audience to study algorithms in optimization and simulation. |
Urls about Course |
ADDITIONAL COURSE INFORMATION Reference 1: U. of Florida Syllabus of Prof. John C. Banko. Reference 2: London School of Business Syllabus of Prof. Victor DeMiguel. |
Attachment |
Syllabus of Simulation Modeling with Business Applications ??.pdf |