Decision Making Under Uncertainty
with RISKOptimizer
By Wayne Winston

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Decision Making Under Uncertainty shows you how to make the best possible decision given an uncertain environment. The models and techniques in this book combine the power of Microsoft Excel and Palisade’s RISKOptimizer add-in to find the best answers to problems affected by uncertainty. Genetic optimization combines with Monte Carlo simulation to provide optimal answers for many difficult, often previously unsolvable, real-world business problems. Topics and examples covered in the text include:

Optimal ordering policies for retailers, including multi-product decisions, impacts of salvage price, diversion of demand between competing products and decisions for style good purchases

Product mix decisions where demand and resource requirements for each product are uncertain

Yield management for managing "inventory" of seats and rooms for airlines and hotels when demand is uncertain

Production, manpower and job shop scheduling that minimizes expected costs in the face of uncertain demand and time requirements

Optimal inventory ordering decisions where product demand is uncertain

Capacity planning and optimal configuration of plant capacities when faced with uncertain demand for a new product

Capital budgeting and project selection when resources required for available projects are uncertain

Optimal cash management policy where cash inflows are uncertain

Capacity planning for utilities where power usage and power prices are uncertain

Retirement planning where returns on available investments are uncertain, and asset allocation to maximize the expected long-run growth rate of investments

Financial decision making including optimal hedging strategies that minimize risk, controlling the VAR for a portfolio involving correlated assets and identification of the combination of investments and derivatives (such as futures and options) which can maximize expected return subject to a constraint on the desired level of risk

Designing optimal audit sampling plans to minimize costs where audited item values are uncertain

Timing market entry decisions where market growth is uncertain, including the possibility of reduced market share due to late entry and danger of limited market growth

Making test-marketing decisions that maximize product profitability in the face of uncertain demand

Bidding decisions in highly uncertain environments and "the winner's curse"

All files discussed in the book are included on a CD-ROM. The step-by-step and teach-by-example approach should make the book suitable for advanced undergraduates, MBAs and most of all practicing finance and operations professionals for both self-study or education classes. 244 pp.

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