Financial Engineering and Risk Management Part II

This course follows on from FE & RM Part I. We will consider portfolio optimization, risk management and some advanced examples of derivatives pricing that draw from structured credit, real options and energy derivatives. We will also cast a critical eye on how financial models are used in practice.

About The Course

Financial Engineering is a multidisciplinary field involving finance and economics, mathematics, statistics, engineering and computational methods.  The emphasis of FE & RM Part II will be on the use of simple stochastic models to (i) solve portfolio optimization problems  (ii) price derivative securities in various asset classes including equities and credit and (iii) consider some advanced applications of financial engineering including algorithmic trading and the pricing of real options. We will also consider the role that financial engineering played during the financial crisis. 

We hope that students who complete the course and the prerequisite course (FE & RM Part I) will have a good understanding of the "rocket science" behind financial engineering. But perhaps more importantly, we hope they will also understand the limitations of this theory in practice and why financial models should always be treated with a healthy degree of skepticism.  

Frequently Asked Questions

  • Will I get a statement of accomplishment after completing this class?

Yes. Students who successfully complete the class will receive a statement of accomplishment signed by the instructors.

Recommended Background

Students should at some point have taken intermediate to advanced undergraduate courses in:  (i)  probability and statistics (ii) linear algebra and (iii) calculus. Students should also be comfortable with the material covered in FE & RM Part I.

With regards to programming, several of the assignments can be completed using Excel or other spreadsheet software. However some assignments will have questions for which spreadsheets are not suitable. Those questions will need to be completed using other software / languages such as R, Matlab, Python etc. it is our intention, however, to provide code fragments in some of these languages so that these assignments will be very accessible even to students with no prior programming experience.