<p>The primary applications of financial engineering are on the trading floor. Financial engineers help value complex transactions. Options and other derivative securities can be valued mathematically by reference to the value of their underlying securities and various market data. The mathematics and modeling can be quite complex. . Financial engineers also compute the risk positions of the trading floor; so-called “Value-at-Risk”.</p>
<p>Financial engineers are talented technologists. They are highly skilled at mathematics of finance, but may be less skilled at dealing with people, marketing, leadership, judgement, convincing a client to trust you. Synthesizing a bunch of non-mathematical factors into a coherent plan. Many of the biggest decisions that companies need to make are not subject to purely mathematical decision-making. </p>
<p>Financial engineers need not be expert in a wide variety of areas that investment bankers may need to be versed in: eg, how the credit markets and rating agencies may react to a certain borrowing plan or change in capital structure. Investment bankers may draw on a team of experts to martial the firm’s efforts on behalf of a particular client. Financial engineers are one type of expert.</p>
<p>These are two sets of talented financial professionals with two somewhat different skill sets. There may be some overlap in skill sets, but there need not be very much.</p>
<p>An investment banker is typically a “line job” in the investment banking division. A financial engineer is typically a “staff job” in the sales & trading, or financial strategies, division. They provide valuable supporting input, but are typically not in charge.</p>