Financial Engineering decoded
Financial engineering is the application of arithmetic techniques for the resolution of finance problem statements. Financial engineering draws on the conceptual interplay of applied mathematics, computer science, statistics, and economic theory. However, Financial Engineering primarily deals with solving fiscal queries using the principles of Engineering. A financial engineer should have comprehensive cognizance of the core principles of financial economics and mathematical tools. Such professionals also routinely apply software principles, in the framing of solutions. As has been seen, most of the programs on offer at major varsities across the U.S and globally have a prerequisite for these programs which is mostly a degree in engineering. Investment banks, commercial banks, hedge funds, insurance companies, corporate treasuries, and regulatory agencies employ graduates of these courses as these businesses need to apply the methods of financial engineering to handle new product development, derivative securities valuation, portfolio structuring, risk management and scenario simulation. The need for quantitative analysis has brought innovation, efficiency and rigor to financial markets and to the investment process. As the pace of financial innovation accelerates, the need for highly qualified people with specific training in financial engineering continues to grow in all market environments.
Quantitative Finance decoded
Mathematical or Quantitative finance can be defined as arithmetic, which is mainly applied in the financial sector. It is a major part of computational finance. There are different undergraduate, postgraduate and research programs of study in mathematical finance and those who are really good in Mathematics can opt for such courses. The occupational prospects for these professionals in the Finance segment are burgeoning, especially in terms of derivatives, hedge funds, investment banking, indices etc. The candidates who have acquired detailed knowledge through a specialized course in this field can work as Mathematics Modeler, Financial Statistician, Actuary or Quantitative Analyst. These professionals apply mathematical and statistical knowledge to real-life cases and devise models to help firms make better-informed financial and business decisions when it comes to pricing, investment and so on.
The difference in the degrees
The mathematical finance professionals mainly do the calculations on risk involved in a particular scenario. They need to make answers by formulating mathematical ways of managing risk. They measure risk using data examples and complex algorithms for which Physics and Mathematics majors with graduate degrees in Quantitative Finance would be effective, for their strong suit, Mathematics would render them effective. In the specific case of the Financial Engineer, the use of engineering principles like mathematics, finance and computer models in order to make management decisions is what characterizes and in fact, differentiates these from the specialty. A basic way of seeing the difference between the two professions is that finance professionals use the products finance engineers create in order to serve clients, meaning that while both professions are different, they work hand-in-hand to create the industry we know today.
The importance of continuing education remains paramount for professionals who work in this sector especially, given the churn rate of the markets and the ever consuming need for technological evolutions. This learning can be leveraged through association with a body of people with similar profiles, who also wish to build on their interests. Such bodies would include the International Association for Quantitative Finance, The Thalesians etc. each of which have websites and conduct regular programs for their associate and life members.
With the rise of super specializations within domains such as Management, Finance, Information Systems, it is crucial that prospective graduates understand the pathway of the domain that they are considering for their vocation as these courses have been created with specific learning outcomes tailored to cater to the professions that these skills are measured to. The multiplicity of domains vis a vis the core finance and technology sectors are covered by the graduate degrees in Finance, Business Administration, Financial Engineering, Computational Science, Quantitative Finance, Econometrics, Actuarial Science and Mathematical Finance, each of these courses encourage the interdisciplinary pursuit of the pure science with the applied sciences, at which point, the discerning factor would be the job profile that each degree leads to, which the student must consider BEFORE making their final choice.