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ENGINEERING TRIPOS PART IIB – 2012/2013
|Leader:||Dr H Jiang (hj231@cam)|
3rd, 5th and 7th December 2012, 9.00am-5.00pm (To be confirmed and reserve 10th and 11th December for the Q&A session for the course assessment)
All participants are expected to be familiar with probability and statistics at the level of an introductory undergraduate course. This background may be acquired through prior courses or independent reading. Participants are also expected to be familiar with simple Excel spreadsheet modelling (see e.g. http://people.pwf.cam.ac.uk/mmh33/ for a tutorial.)
|Assessment:||100% coursework: Individual project combining spreadsheet modelling, written analysis, and a management-style report. This will be undertaken during the Michaelmas-Lent break.|
This module introduces students to two essential and complementary ways of dealing with future uncertainties. On one hand, we have diversification, the notion that you should "not put all your eggs in one basket", is both intuitive and ubiquitous in modern management. This exemplifies passive risk management. On the other, we have the real options paradigm. This emphasises that future value depends both on unfolding uncertainties, which you cannot control, and the flexibility of your future responses. By investing in research and development projects, for example, companies buy the option to launch a product, which they may or may not exercise, depending on the level of success of the R and D effort and on market conditions at the time of launch. However, flexibility also costs money: R and D expenditure, for example in the biotech industry, can be huge. So how much flexibility shall we build into the system? This is the realm of project design for active risk management. System designers and project managers need tools that help them decide if added flexibility is worth the money. This course provides the students with a mindset and a suite of tools to tackle such problems.
The emphasis is on management and design of technological projects. Examples and case studies will illustrate how theory can be adapted to actual conditions.
Day 1: Foundations
Day 2: Portfolio Thinking
Day 3: Real Options Analysis
Please see the Booklist for Group I Courses for references for this module.
See also http://www2.eng.cam.ac.uk/~hj231/TPE6
Last updated: May 2012