New "Financial Economics" major - another selling point for Wall Street wannabes

Colleges & Universities Columbia University
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<p>You can check out the specifics of the requirements here: [Economics</a> | Columbia College](<a href=“Columbia College Bulletin < Columbia College | Columbia University”>Columbia College Bulletin < Columbia College | Columbia University)</p>

<p>admissionsgeek or anyone in the know - are they looking into offering this as a minor in SEAS? I think it would be only fair to give SEAS students the opportunity to earn an academic designation with the word “financial” in it (without majoring in FE, which is an order of magnitude more difficult). People say it doesn’t matter, but the fact remains that some firms are looking for the word “finance” on your resume as a signal of interest.</p>

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<p>Will this be an application-only major like fin. eng.?</p>

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<p>The requirements suggest it wouldn’t be an apply for major, but rather just something you start taking as soon as you want, and then declare in soph year. It appears to be a rebranding of the Econ-OR joint major with two things here - first it adds in more bus classes, second it reduces some of the more intense OR based courses and makes them electives.</p>

<p>No word on it being a minor, but SEAS is relatively responsive to student desires, if students rallied within SEAS and within the Econ department to develop a minor version of financial econ, i could see it happening (there is a minor version of sustainable development, which is a big topic to cover, so I can’t see why not financial econ). it might not happen overnight, but with the right pressure - SEAS is definitely interested in giving students what they want. the only possible counterarguments i could see…a) SEAS is already so Wall Street heavy, what would this mean; b) its too big of a topic to properly fit into a 7 course minor - to teach both the finance particular aspects and the necessary econ background; c) fear within Econ of it becoming too popular and not being able to have proper classes for it.</p>

<p>And as a tangent: SEAS students shouldn’t forget the Entrepreneurship minor which is particular and special to SEAS.</p>

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<p>I don’t think this major is going to require an application. There’s only one in the entirely of the undergraduate schools and that’s the financial engineering concentration.</p>

<p>As an engineer and FE major (so far), I’m a bit biased against this major because of it’s lack of depth. FE definitely isn’t as quantitative or rigorous as a masters but then again, it’s only an undergraduate degree. The financial economics major offers marginally more than a regular economics degree except for some basic finance classes and elective in OR classes and management. I don’t understand how this gives you any idea of how capital is allocated in the financial system or how regulation affects it. </p>

<p>I’ve personally taken accounting and finance and I know students who’ve taken financial economics and corporate finance, the former is theoretical and has a lot to do portfolio theory (which didn’t fare so well in the financial crisis) and the latter is focused on pricing companies. </p>

<p>I think it’s a way of setting Columbia College students up for jobs in finance given the tough economic environment. I don’t know how well it will work, but it’s worth a shot. However, I believe that the Economics department continues to sacrifice a solid knowledge base grounded in theory and mathematics for majors that sound appealing but lack the fundamentals. I’m not talking about Intermediate Macro and Micro but higher level statistics courses, more mathematic modelling, and greater depth in the field of economics with a focus on intuition and incentives.</p>

<p>Financial economics, accounting and finance, and other classes teach basic facts about finance, but there’s no real motivation for students to understand how to build models and generate theories about finance. The financial theories have been greatly changed by the crisis and the market evolves very quickly. Knowledge is one thing, but the ability to analyze and generate ideas is another thing entirely, something that the economics department continues to neglect.</p>

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<p>On the major itself, I see that the “business school” classes they’re accepting are the BS management/marketing ones. It would have been nice if they actually opened up the real GSB finance classes (Capital Markets and Investments, Options Markets, Debt Markets).</p>

<p>I agree with beard tax in that this is a sort of FE-lite in terms of required math/stat/CS. No linear algebra, ODE, heck you can even take STAT 1211 instead of 3105 and 3107. None of that dreaded data structures/systems class either.</p>

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<p>Which courses would you include, though? I think they have a pretty nice set of electives in there:</p>

<h1>ECON V3265 Economics of money and banking</h1>

<h1>ECON W4505 International monetary theory and policy</h1>

<h1>STAT W4290 Statistical methods in finance</h1>

<h1>STAT W4635 Stochastic processes for finance</h1>

<h1>MATH V3050 Discrete time models in finance</h1>

<h1>MATH W4077 Introduction to the mathematics of finance</h1>

<h1>IEOR E3106 Introduction to OR: stochastic models</h1>

<h1>IEOR E4700 Introduction to financial engineering</h1>

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<p>Is the FE department as cutting edge as you make it out to be (in contrast to the economics department, I’m assuming)? Looking at their classes, it seems that they are still teaching the same pricing and asset allocation models as before. I think about it this way - in FE you learn how to build and refine models that people came up with. I would argue that a more math/stat theory-focused education would be better preparation for dealing with financial innovation that hasn’t occurred yet. </p>

<p>As you’re a current student in the department, I think it would be interesting to hear your take on this. Thanks.</p>

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<p>I don’t think the FE department is cutting edge, since as an undergraduate you’ll be learning material that’s already been proven. However, the financial engineering curriculum offers greater exposure and depth to finance and gives students a theoretical and application-based set of studies.</p>

<p>It’s not just learning about what the model does, but how it was built and what the underlying assumptions are. For example, Black-Scholes pricing model is a partial differential equation. If you learned this in the College (which you probably wouldn’t), you would memorize this equation and learn several basic facts about it, and then price a few vanilla European options.</p>

<p>In any engineering curriculum, you would go through the proof of the model or at least understand the implications and reasoning behind it. For example, the model is based off of a normal distribution and an option is priced on the expected value of the underlying - also, the Black-Scholes model can be replicated using binomial trees.</p>

<p>I wouldn’t take this as an actual example in class, but an analogy of how material is taught. The financial markets are quantitative, especially in fixed income and a solid base in statistics and calculus is necessary. The fact is that you’ll only learn a survey knowledge of finance in financial economics because economics students don’t have a requisite background. Even learning the yield curve, though there’s not much calculus, requires quantitative thinking.</p>

<p>The engineering curriculum means that you’ll be prepared for changes in the financial markets. Students will have the ability to analyze the fundamentals and recognize changes in the industry. Why are derivatives so risky? By studying the pricing of a transaction, you realize that swaps and forward rate agreements utilize relatively little upfront cash, since the payments are netted out to give only one cash flow. This means that many derivative instruments are inherently leveraged, and when you leverage to enter into more contracts (essentially leveraged leverage), then you’re sitting on a time bomb. </p>

<p>In the end, it’s about how deep you dig into the material and how much you question the foundations of any academic discipline. This isn’t about debating about philosophers, in which there’s no right or wrong answer, but analyzing a textbook or academic paper and asking why that is, how it happens, and what the implications are, something that the economics department lacks. I’m not saying that the FE department does it any better but you’ll be less likely to get an A if you don’t do this work.</p>

<p>The electives all look pretty good, but it’s the fact that students take the path of least resistance. No one is really going to challenge themselves when they can get the financial economics degree by taking entrepreneurship, leadership in organizations, economics of business organizations, and marketing management. In the end, financial economics will just be another watered down major with students who do the bare minimum. It’s a bit more justifiable in engineering when the bare minimum is quite challenging, but it’s inexcusable for the economics department to set the bar so low. Statistics W1211 where 60% of the grades are A’s? Let’s give the students more of a challenge.</p>

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<p>If I did an Applied Math major and took the set of electives I listed earlier, do you think I would develop the same level of rigorous financial thought processes that an FE major would?</p>

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<p>I think applied mathematics is a great major for finance along with some economics and business school electives. Watch out also for the GPA requirements to enter the financial services industry. Recruiters will allow engineers and quantitative majors to have lower GPA’s but it’s only by 0.2-0.3, which isn’t enough to compensate for the lower average grades and rigor.</p>

<p>Just something to think about, but then again, college is the last time you’ll be able to learn as a full-time job. It’s a give and take so definitely enroll in some grade inflating classes, which you should get in economics.</p>

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<p>Will this significantly impact overall admission rates for CC? (could it be too popular)</p>

<p>And will choosing this major on the application benefit/harm/do nothing in terms of admission chances?</p>

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<p>this is spot on</p>

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<p>Sorry but Black-Scholes pricing model is a Junior Material in FE major along with binomial & trinomial models and further… Also do full proof and it’s math 200 sequence. I don’t know what school you went to but most FE majors are 90% upper-level math (100 level like full series of calculus and linear algebra and vectors are all required… 200 is all full-applied math like full proof of LaGrange multipliers and all… I can see that you pride on your major but there’s a reason why 90% of FE majors are Asians. (It’s a joke. Laugh…) Let me know that 50% of the major drops out in 2nd semester Junior because they cannot pass some serious finance classes. Try not to look down on people when you don’t know the full story of it.</p>