Financial engineering is the development of financial products and technical and quantitative strategies. It is a procedure which involves the production and arrangement of a variety of financial instruments. A financial objective is achieved with a certain amount of cost, tax, and legal formalities. For instance; dividing present financial products in a certain way that new financial products are created from them.
A Financial Engineer Maximizes Profit, But How?
Financial engineering sometimes refers to the plan which organizations implement with the intention of maximizing returns and other important use to maximize profits or other important performance parameters. Some examples are the creation of derivative against the usual risks by a party to a transaction, the structuring of a purchase or sale in a way that best serves the buyer and the seller, and the use of new methods to calculate the market value of new or existing financial instruments.There is a great demand for financial engineering. They have median salary from $52,215 to $193,076.
A financial engineer does the following:
Designs, Creats And Implements Financial Instruments
Financial engineers devise, produce and execute new financial instruments, models and procedures that can help solve disputes regarding finance and utilize new financial opportunities.
Formulates New Investment Strategies Using Mathematical Tools
Mathematical tools are used by financial engineers to formulate new investment strategies. The new products formed by financial engineers can be the answer to the disputes and problems which arise during the financial processes. Or as ways to capitalize on returns from forthcoming investment chances.
Conducts In-Depth Research
Financial engineers do a thorough analysis and research in order to create these models and theories. And they rely upon these in-depth data analysis and risk analysis.
Expertise In Academic Fields: Economics, Finance and Statistics
Financial engineers apply their knowledge of Corporate Finance, Accounting, Economics, Statistics, etc. in diverse fields. They usually work in the field of securities, banking, finance and consulting.
Academic Qualifications:
There is a bachelors as well as a Masters in Financial Engineering (MFE) which are available. Masters in Financial Engineering is a 2 year program which gives exposure to students academically, as well as practically, in the industries.
The program serves students seeking a broad technical knowledge of the prices of derivatives, asset management, design and management of market risk. The MFE is particularly important for those who want to work with:
Portfolio management and security analysis,
Hedge funds,
Risk management,
Trading securities and derivatives,
Corporate finance and corporate restructuring,
Venture capital and private equity.
Creative And Techinical Field
Many financial engineers say the financial engineering includes creativity as much as the technicalities of this field. Since the field is a pioneer and innovator. Also due the availability of cheaper and faster information technology this field of financial engineering has expanded greatly
Few Concerns:
A concern about Financial Engineering is that it was somewhat considered controversial, and some believe that all systemic risks of the economy are increasing rather than reducing, For instance; the responsibility of a financial engineer lies in the development and use of derivatives such as credit default swaps and mortgage-backed securities, that were given the blame for the financial crisis around 2007-2008.
But keeping theses concerns aside, Financial Engineering is a great and financially lucrative field as it combines both finance and engineering, definitely worth a look.