SYS 660 Spring 2018 Midterm Exam

SYS 660 Spring 2018 Midterm Exam
Due: 3:00 PM, March 27, 2018

Over the last few years, cryptocurrencies such as Bitcoin have proliferated and have been featured prominently in the press. Prices have increased dramatically yet remain volatile. Many early investors in cryptocurrencies have become quite wealthy, but there are concerns by many, including Nobel Prize winning economists, that cryptocurrencies are an investment bubble that will ultimately pop:

https://www.nytimes.com/2018/01/29/opinion/bitcoin-bubble-fraud.html

In addition, the anonymous nature of cryptocurrencies has made them popular for criminal transactions. As a result, many governments around the world have begun or are considering regulating cryptocurrencies. Imagine that you are advising a national government on how cryptocurrencies should be regulated, if at all. You may choose any government that you like, but keep in mind that different governments will have different preferences. You will have to take this into account. Furthermore, any regulatory scheme you may choose will incur costs as it will be necessary to monitor the markets, enforce laws, and prosecute violators. As with any regulations, there is the risk that the regulations will be ineffective, make problems worse, or trigger unintended consequences. Apply the techniques you have learned in this class to develop a recommendation to the government you are advising regarding the regulation of cryptocurrencies.

In particular:

• Research the topic of cryptocurrencies including benefits, costs, and risks. Cite all sources used.

• Develop a set of fundamental objectives and associated attributes

• Identify alternatives...there may be many. You can also create your own. Be creative.

  (Remember that doing nothing is also an alternative)

• Identify uncertain attributes and model them appropriately

• Develop a multi-attribute utility model to evaluate your alternatives

• Perform a sensitivity analysis to assess the robustness of your model

• Make a recommendation

  This an open ended assignment. There is no right or wrong answer. Instead you will be evaluated by the quality of your analysis. There will most likely not be sufficient data to develop objective probability distributions. You may generate your own subjective probability distributions based on your interpretation of what you uncover during your research. Likewise you will need to develop your own utility functions to reflect your interpretation of the situation. Just ensure that you justify your assumptions.

  This is an individual, take-home exam. You may use any generally available research sources such as news articles and journal papers, but you may not discuss the exam with your peers.

  Grading criteria (equally weighted):

• Completeness of analysis

• Coherency of analysis

• Correct application of decision analysis tools

• Justification of decision model and assumptions

• Clarity of exposition