Financial engineering is a relatively broad term encompassing things regarding the study, development, and management of financial instruments and funds. The discipline seeks to provide financial managers with the tools, information, and support they need in order to make financial decisions that are economically-sound. In other words, if an engineer can demonstrate that he/she can model financial instruments using the same calculus and decision-making techniques that one would apply to an automobile, then they have a solid academic foundation to work from. Financial engineering uses financial instruments, such as derivatives, securities, futures, swap agreements, and so on, to help managers make better-informed decisions regarding their portfolios, the lending portfolio of their companies, etc. There are numerous topics that fall under the broader umbrella of financial engineering, which include financial engineering research, applied financial engineering, economics of financial markets, financial applications in the health care and insurance industries, risk management in the financial sector, and so on.
One of the primary goals of this branch of math is to provide managers with the tools, information, and support they need to make sound financial management decisions. Graduates in the program will not only be able to complete their Master’s degree but will also be prepared to implement new methods and improve upon the ones they already have. A solid financial management plan will allow you to start implementing solutions right away and will lay the groundwork for a long and successful career in finance.
While the focus of financial planning is to provide managers with the information they need to make better-informed decisions about their portfolio, the discipline goes a step further and goes into the design of the portfolio. It looks into the use of leverage, dividends, option pricing, and various other tools. It is important to have a solid understanding of how all of these tools work and the trade-offs that come with them in order to create a plan that will meet your needs over the long-term. A good financial planning educational program should also introduce students to the concepts of asset allocation and financial risk. An effective portfolio allows you to raise capital, borrow against it, and invest for growth purposes. The longer your portfolio is exposed to risk, the less likely your returns will be as profitable.