<p>whats financial engineering? and which schools offer it?</p>
<p>Here you will find Princeton’s explanation of its program: <a href=“http://www.orfe.princeton.edu/undergraduate/Yellow%20Pages%202004-05/YP04-05.pdf[/url]”>http://www.orfe.princeton.edu/undergraduate/Yellow%20Pages%202004-05/YP04-05.pdf</a></p>
<p>Read it and come back and tell us what you think it is because it is a new one on me and I have not been able to quite figure it out after reading this. It appears to be a program light on engineering and heavy on business finance and methods, math and statistics, and computer sytems. I do not know what other colleges have it.</p>
<p>Think in the broader sense of engineering as a way of assembling various building blocks in order to create something else. In this case, the building blocks are financial instruments (stocks, bonds) and their related derivative securities (options, swaps). What you are trying to create is a particular payoff profile, out of instruments that have different payoff profiles.</p>
<p>A direct investment in a stock has a simple straight-line payoff profile. As the value of the stock goes up, the value of your holding goes up directly, in the same proportion.</p>
<p>Options are different. Depending on the instrument, the value of your holding may go up as the stock rises (or falls, or both…), and then stay constant above (or below) a certain value of the underlying stock.</p>
<p>By combining options and investments in the underlying stock one can tailor portfolio payoff profiles to meet desired objectives.</p>
<p>This is perhaps the most central aspect of financial enginering.</p>
<p>A question an investment firm frequently may need to ask is “how much should we pay for this weird investment opportunity we’re being asked to bid on?”. The investment opportunity can be valued in part by developing a portfolio of readily-priced securities and options that match its payoff profile.</p>
<p>This field is highly mathematical. So is conventional engineering, in college, but in practice most engineers do not heavily use all the math they learned. In financial engineering you do. The math underlying options valuation is similar to that of heat transfer in mechanical engineering; complex partial differential equations.</p>
<p>The people I’ve known who are doing this kind of work at the highest levels are really really smart. Many are physics PhDs who had to do something else to eat when they couldn’t get steady work in physics.</p>
<p>The tie-in with OR in Princeton’s program is appropriate. Statistics and simulation are very important in this field.</p>
<p>I would think that most people wouldn’t really know as an entering undergraduate that they want to pursue this challenging but very specialized field. There are grad programs in financial engineering that make more sense to me. Some good programs are at : Carnegie Mellon, U Wisconsin, BU I think. The U Chicago MBA program can also go in a pretty quantitative direction I believe.</p>
<p>Thank you monydad! Your explanation is far better then I gleamed off the Pton website.</p>
<p>Monydad should suggest to Princeton that he rewrite its materials.</p>
<p>Financial Engineering is generally a better graduate school subject area, I think one would be better of studying something more broadbased like physics or mathematics as an undergraduate.</p>
<p>so is it very similar to operations research?</p>
<p>Operations Research applies quantitative techniques to various types of business problems, in various types of businesses. It is an older, more established field. Financial engineering is pretty recent.</p>
<p>The classic problems in OR are in areas such as scheduling and inventory management.(“Operations” of a manufacturing-type business). Optimization techniques are very important in OR. For example: find the least-cost schedule of workers and raw materials for a factory in order to meet projected monthly sales for your product, given various constraints. Constraints might be: minimum monthly staffing levels or raw materials order amounts; on-site storage capacity for raw materials and your finished product, etc.</p>
<p>FE is similar to OR in that they both apply mathematical and computer techniques to business problems. But the areas of application are pretty different. </p>
<p>For FE, a whole underlying theoretical framework has grown up out of financial economics, so its really its own discipline at this point.</p>
<p>I see OR as a collection of techniques (esp. optimization) which may find application in a number of disciplines and industries, whereas FE is a particular discipline that has techniques geared for its own particular needs alone. For example, there are applications of OR to FE, but not vica versa, since FE is its own “black hole”.</p>
<p>thanks for ur help monydad…</p>
<p>do any universities in canada offer FE?</p>
<p>Im not sure, but you could make your own major.</p>
<p>how cud u make ur own major? wud that be possible in universities in canada? like waterloo or mcgill?</p>
<p>Not to be harsh but are you sure you would want to go into financial engineering? Cause based on your grammar, I believe you would find a communications major hard.</p>
<p>wats wrong with my grammer?</p>
<p>I’ve been thinking about going into that field for awhile now…however I will be attending University of Michigan…and fin.eng. there is a grad degree. So what should I major in for undergrad…something business related (since michigan’s bschool is top-notch), econ, or industrial eng/operations research?</p>
<p>Thanks!</p>
<p>Sorry I must have posted in the wrong thread with that comment.</p>
<p>sounds like you could make a lot of money with that kind of degree</p>