Schedule
2009 Edition, updated
Sept 1, 2010 
 

Note: Many presentations will be revised during the semester -- new postings will be  marked by a star.

Date
Lecture Topic
Slide Show
Reading
Assignment
Note:     FD = Flexibility in Design text (draft chapters)
Readers of this draft please send comments, criticisms, suggestions to ardent@mit.edu  -- Thanks
ASA = Applied Systems Analysis text                                               AP = Application Portfolio exercise
Numbers in italics refer to problems students should do on their own and self-grade using posted answers
Recitation Times: Tuesdays at 1; Wednesdays at 11

Part 1: Overview of Flexibility in Design
Teaching Objective:  To understand why and how flexibility in design increases expected value
Sept
10
Th
Paradigm Shift: Focus on  Distribution of Outcomes instead of single outcome.  Effort to "move distribution to right"
Discussion of Syllabus
Introduction
Paradigm Shift
FD Chapter 1;
FD Appendix A
ESD.70 in parallel for 4 days
Uncertainty,
AP 1: Project Definition

15
Tu
Uncertainty
Uncertainty*
FD Chapter 2




Recitation
Discussion of Previous Application Portfolios



17

Garage Case: Concepts*
Intro to Flexibility
FD Chapter 3
Vertical Phasing
 

22
Tu
Garage Case: Details*
Flaw of Averages*

Blossoms --Flaw video
Garage paper
SPE paper
Above due , AP 2



Recitation
Detailed discussion of Garage case analysis


Part 2: Basic Concepts for Valuation
Teaching Objective: To Establish
Understanding of basic elements needed for Valuation
Discounted Cash Flows, Alternative Valuation Measures,
Technical Efficiency; Economies of Scale; Phasing

24

DCF and Present Value;
Measures of Value
Present Value & DCF
Economic Evaluation
FD Appendix B
13.3

29
Tu
Choice of Discount Rate*, Opportunity Cost, WACC*
Choice of Discount Rate; WACC
FD Appendix B
ASA 12






Recitation



Oct 1
Asphalt vs. Concrete highways; Basic System Model: production function and Economies of Scale* Asphalt vs. Concrete;
Production Functions
ASA 2 2.4

 6
Tu
Determining EoS from cost function Constrained Optimization* and Marginal Analysis and EoS*
Constrained Optimization; Marginal Analysis
ASA 4
AP2 due
AP3



Recitation




 8

Optimum expansion size -- issues
Capacity Expansion*
FD Appendix C
Optimal capacity combined

13
Tu
NO CLASS (MIT FOLLOWS MONDAY SCHEDULE)



Recitation
Work on Application Portfolios


Part 3:  Forecasting and Dynamic Modeling
Teaching Objective:  Development and Use of Dynamic Forecasts
Simulation, Dynamic Models, Decision Analysis and Dynamic Programming

15

Simulation -- Appendix D Use of Simulation
Antamina Mine Example
FD Appendix D AP3 due (deferred to Tuesday)

20
Tu
Mid-Term Review
Visualizing PF etc

Optimal Capacity due



Recitation
Quiz Preparation



22

Mid-term Quiz
 
Quiz solution


27
Tu
Decision Analysis   Primitive Models
Decision Analysis
DA by Folding Back
ASA 16
Babajide paper
DA Examples
AP4    16.10, 16.11



Recitation




29

Lattice Model to represent uncertainty; Lattice Model;
Binomial fitting.xls
FD Chapter 4
Binomial lattice.xls
Best Fit.xls
AP5+6 combined
Nov
3
Tu
Evaluation with Lattice Model
Lattice Valuation*
Binomial Tree -- Options
FD Appendix E



Recitation




5

Dynamic Programming
Dynamic Programming*

ASA 7
7.5
Part 4: Identification of Candidate Flexibilities
Teaching Objective: How to identify most valuable flexibilities efficiently
Mid-fidelity Screening models; Extending range of consideration

10
Tu
Lattice vs. Decision Analysis
Mid-fidelity Screening Models
Lattice vs Dec. Analysis*
Screening Models
FD Chapter 5
 AP4 due



Recitation




12

Extended range analysis;
Application
Cardin Presentation
Yingxia presentation

Yingxia PhD;  Lin paper
Wilds thesis

Part 5: Evaluation and Choice of Preferred Alternatives
Teaching Objective: Theory and Practice of Multi-Dimensional Evaluation under Uncertainty
Multi-dimensional measures of distribution; selection criteria; sensitivity analysis

17
Tu
Multidimensional choice theory and practice
Multi-Dimensional choice theory and practice
FD Chapter 6

AP5+6 due



Recitation




19

Option Theory
Introduction to Options in Finance and Real Options
AP completion
AP Grading Criteria
Draft  of Complete AP

24
Tu
"Real Options Analysis" -- what it is and why not
Methods and Assumptions of RO
FD Appendix F
Borison


26

THANKSGIVING



Part 6:  Implementation
Teaching Objective: Understanding Implementation Issues and Guidance on their Resolution
Theory and Practice, illustrated by numerous examples
Dec
1
Tu
Implementation Issues: Theory
Implementation
FD Chapter 7

Draft AP due

3

Implementation Issues: Cases
HCSC Chicago;
Houston Metro
Dartmouth Hospital; Newcastle Hospital

McConnell PhD  pages 62-68; 253-256; 406-414


8
Tu Example Applications:
Hassan Oil Field
FD Chapter 8
 
Final AP due plus slide set

  10

Example Applications;
New Analytic Methods
Quispez-Asin
Hybrid Case
Greden , Hassan Oil Hassan Sat