Systems Engineering Bibliography

Buede, Dennis M. The Engineering Design of Systems: Models and Methods, 3rd Edition. John Wiley & Sons, 2016.

Strong focus on function analysis and decision analysis.  Good introduction to IDEF0.

Chapman, William L., Terry Bahill, and A. Wayne Wymore. Engineering Modeling and Design. Boca Raton, FL: CRC Press, Taylor & Francis Group, 2019.

Forsberg, Kevin, Hal Mooz, and Howard Cotterman. Visualizing Project Management: Models and Frameworks for Mastering Complex Systems. Hoboken, NJ: J. Wiley, 2005.

The rare project management book that gives emphasis on the critical importance of systems engineering.

Gibson, John E., William T. Scherer, William F. Gibson, and Michael C. Smith. How to Do Systems Analysis: Primer and Casebook. Hoboken, NJ: Wiley, 2017.

Teaches systems analysis (systems decision making) rather than systems engineering.  Systems analysis is an essential practice in systems engineering.  Bahill's book on trade-off analysis is another one of few books on the subject.

Hitchins, Derek K. Systems Engineering a 21st Century Systems Methodology. Chichester, West Sussex, England: John Wiley, 2007.

Kossiakoff, Alexander, Steven M. Biemer, Samuel J. Seymour, and David A. Flanigan. Systems Engineering: Principles and Practice. Hoboken, NJ: John Wiley & Sons, Inc., 2020.

James, Martin. N. System Engineering Guide Book. Springer, 1997.

Rechtin, Eberhardt. Systems Architecting: Creating and Building Complex Systems. Englewood Cliffs, N.J: Prentice Hall, 1991.

Sage, Andrew P., and Andrew P. Sage. Systems Engineering. New York: J. Wiley & Sons, 1992.

Stevens, Richard J. Systems Engineering: Coping with Complexity. London: Pearson/Prentice Hall, 1998.

Walden, David D., Garry J. Roedler, Kevin Forsberg, R. Douglas Hamelin, and Thomas M. Shortell. INCOSE Systems Engineering Handbook: a Guide for System Life Cycle Processes and Activities. Hoboken, NJ: Wiley, 2015.

Wymore, A. Wayne. Model-Based Systems Engineering: an Introduction to the Mathematical Theory of Discrete Systems and the Tricotyledon Theory of System Design. Boca Raton: CRC Press, 1993.

Dude, Where's My System?

What are the user requirements for using an ATM? The most obvious ones are: ability to withdraw cash, ability to check account balance, ability to make deposits.

But how about others: ability to retrieve all the coins and cash in the ATM, ability to unjam the ATM if things get stuck, ability to physically move the ATM?

They are not requirements of the bank's customers, but they all valid user requirements. The user requirements depend on who the users are.

To build a successful systems, it's necessary to identify who the users of the system are. The 'who' does not mean specific persons, but categories (or types) of users.  For an ATM, these can include: the paying stakeholder, bank customers, customers of other banks with whom the ATM's bank has arrangements with, bank personnel who need to manage the ATM, security personnel, network staff who need to ensure the ATM is connected, back office bank staff who need to analyse and report on data about ATM usage, and so on.

It's clear that if we miss one of the categories of users, we will be unlikely to have miraculously provided system functionality that satisfies their needs.

One challenge to identify categories of users occurs when we are building new systems that are not merely upgrade of existing systems. In this case, there are currently no existing users.  The categories of users would need to be identified.  Other sources, such as the concept of operations, or the operating model are sources of an initial set of users. 

Does your system development process include a rigorous identification of the system users?

References:

Stevens, R. J. (1998). Systems engineering: Coping with complexity. London: Pearson/Prentice Hall.

Forwards and Options

Derivatives contracts come in two basic types: forwards, and options. More complex derivatives contracts build on these basic types.

FORWARDS

A forward contract is an agreement between two parties to trade a specified volume of a specified asset, at a specified price, at a specified future date. It's a binding, legal agreement.

Terms

The asset being traded is called the underlying asset. These can be commodities, shares, indexes, etc. The expiration date is when the contract has been settled. The spot price is the current market price.  The term long is used to refer to the buyer, and short to the seller. 

Payoff on a Forward Contract

Generally, the long party benefits when the (spot) price of the asset goes up (relative to the contract price), and the short party benefits if the price of the asset goes down.

For example, let's say the contract was to purchase a unit of stock index at $1,000 at the end of December. If at the end of December, the spot price for that stock index is $1,500, then:

Long position to the contract makes: $1,500 - $1,000 = $500, because they are able to buy the asset at $1,000 instead of the current market price of $1,500.

Short position to the contact loses: $1,000 - $1,500 = ($500), because they are obligated to sell the asset at $1,000 instead of the current market prices of $1,500.

FUTURES

Futures are forward contracts that can be traded at futures exchanges. Some futures exchanges are the CME (Chicago Mercantile Exchange), ICE (Intercontinental Exchange), LIFFE (London International Financial Futures Exchange), Eurex, SGX (Singapore Exchange), OSE (Osaka Tokyo Exchange), and the HKEx (Hong Kong Exchange and Clearing).

A party may buy a futures contract and become the new party.  The party that sold the contract removes themselves from the trade.

OPTIONS

An options contract gives the buyer of the contract the right (but not the obligation) to trade an asset at the contract price. There are two kinds. The call option gives the buyer of the contract the right to purchase an asset.  The put options gives the buyer the right to sell an asset.

Options Terminology

The strike price is the price the buyer pays for an asset, also called the exercise price. The act of acting on their right is called exercise.  Options contracts indicate the style of exercise allowed:

• American style allows the buyer to exercise their right only at the expiration date.
• European style allows the buyer to exercise their right  at anytime before and on the expiration date.
• Bermuda style allows the buyer to exercise their right during a defined period before and on the expiration date 

Call Options

A call option  that gives the buyer the option to not buy the asset if the contract price is higher than the spot price; ie, if they will lose money.  The seller's obligation remains the same: sell the asset at the contract price.  In a call option, the seller can only lose money, so the payoff comes in the form of a premium.  The seller needs to be paid upfront to put themselves in this exposure.

References

McDonald, Robert Lynch. Derivatives Markets. Boston: Pearson, 2013.