Financial Engineering - Definition and Overview

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.

Areas where financial engineering techniques are employed include:

• Investment banking
• Corporate strategic planning
• Risk management
• Primary and derivative securities valuation
• Swaps & derivatives trading or dealing
• Financial information systems management
• Portfolio management
• Securities trading

This is a field of knowledge that is drawing the attention of computer science graduates with a good mathematical background.

See also

• International Swaps & Derivatives Association
• List of finance topics

External links

• Financial Mathematics, Financial Engineering and Risk Management (http://finmath.com/)