311_session_15_simulation_hiroshi (1)

311_session_15_simulation_hiroshi (1) - Simulation BUAD311...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Simulation BUAD311 Session 15 Hiroshi Ochiumi
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Objectives Generate random numbers. Simple Examples Portfolio Optimization New Product Development Simulate waiting lines M/M/1 M/D/1
Background image of page 2
3 Random Number Generator = RAND() generates a random number between 0 and 1 Uniform Distribution between [0,1] = 2*RAND() generates a random variable between 0 and 2 = 3 + RAND() generates a random variable between 3 an 4 = a + (b-a)*RAND() generates a random variable between a and b Uniform Distribution between [a, b]
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Generating Normal Distribution = NORMINV(probability, mean, standard deviation) If we assign probability = RAND() then NORMINV function generates a random variable that follows a normal distribution with specified mean and standard deviation
Background image of page 4
5 Portfolio Example Stock A: price follows a Normal Distribution with mean 100 and standard deviation 20 Stock B: price follows a Normal Distribution with mean 120 and standard deviation 30 Portfolio: 50% of Stock A and 50% of
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Portfolio Example Standard deviation of portfolio is less than standard deviation of Stock A and Stock B Why? Risk pooling Try portfolios: 30% Stock A + 70% Stock B 50% Stock A + 50% Stock B 70% Stock A + 30% Stock B
Background image of page 6
7 Project Management Example Project with a deadline 100 days Project duration estimation: Normal with mean 110 and standard deviation 10 (days) Fixed fee (100K) plus an incentive plan: if the project is completed earlier than 100 days, earn bonus 1K / day if the project is late, pay penalty 4K / day You can reduce the expected project duration (now 110) by paying 2K / day up to 20 days What duration gives the highest net profit?
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8 More Data For the sake of simplicity, we only consider the following reduction plans: 90, 95, 100, 105 days First, make a decision based on expected values
Background image of page 8
9 Solution? Decision
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/22/2010 for the course BUAD 311 taught by Professor Vaitsos during the Winter '07 term at USC.

Page1 / 25

311_session_15_simulation_hiroshi (1) - Simulation BUAD311...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online