Financial Engineering

Course Description:

Financial Engineering is a multidisciplinary field related to the creation of new financial instruments and strategies, typically exotic options and specialized interest rate derivatives. The field applies engineering methodologies to problems in finance and employs financial theory and applied mathematics as well as computation and the practice of programming. Despite its name, financial engineering does not belong to any of the fields in traditional engineering.

Financial engineering is also the process of creating new securities or processes, and designing new financial instruments, especially derivative securities. More importantly financial engineering is the process of employing mathematical, finance and computer modeling skills to make pricing, hedging, trading and portfolio management decisions. Utilizing various derivative securities and other methods, financial engineering aims to precisely control the financial risk that an entity takes on. Methods can be employed to take on unlimited risks under certain events, or completely eliminate other risks by utilizing combinations of derivative and other securities.

Financial engineering can be applied to many different types of currencies and pricing options. These include equity, fixed income such as bonds, commodities such as oil or gold, as well as derivatives, swaps, futures, forwards, options, and embedded options. With financial engineering comes many risks. Risks are divided into market risk and credit risk. Market risks can be managed using risk identification, risk measurements, and risk management. Credit risks can be managed using credit modeling and credit pricing.

Career Prospects:

A financial engineer works for financial services companies either in-house or as an outside consultant. Career opportunities in research, academic and industrial sectors may also be available to a financial engineer. Education, knowledge, and experience in areas such as capital markets, financial technology, and computational finance allow many qualified financial engineers career opportunities in top financial services companies.

Financial markets join the buyers and sellers of financial products or securities. Financial products and securities are tradable units of capital or wealth and the main focus of a financial engineer. A financial engineer could be involved in buying and selling capital in person.

The main career duties of a financial engineer are to create wealth by trading the company's capital, create new financial products, conduct risk management and measurement, and manage investment portfolios. Financial engineering is the mathematical science of the laws of financial products and securities. A solid understanding of both applied mathematics and investment models is absolutely necessary for a financial engineer.