In the world of investing and stock trading the role of the Financial Engineer is gaining prominence. This professional is a highly-trained specialist who is vital to the fields of risk management and investment strategizing. He uses quantitative analysis to solve financial problems and develop financial models.
Resource: 20 Best Online Master of Finance Degree Programs 2016
What is a Financial Engineer?
First, he is not an engineer. His degree program is not housed in the engineering department of the university and is not accredited by ABET. Programs in financial engineering are accredited by the International Association of Quantitative Finance. The term “quantitative” denotes a heavy reliance on mathematics. Even though the analysts are not engineers,many have engineering backgrounds. Second, financial engineers are also called computational engineers. They utilize computer science and algorithms to solve financial problems. They also apply mathematical rules and principles to the solutions.
What Do they Do?
Financial Engineers use their skills to predict how stocks and other financial tools will perform, to manage portfolios and to assess the risk of investments. They use math and computer science to build models of trends in the stock market. They have an extensive knowledge of the theory of finance and of the historical behaviors of specific markets. Using this knowledge and their computer skills they create simulations so that clients can see how certain investments are likely to perform. Based on his models, and realizing that the stock market sometimes acts in unanticipated ways, the computational analyst advises clients on how to manage their stock portfolios. Many of these professionals work in risk management in CVE, or credit valuation adjustment. Simply put, they determine the likely risks of an investment and, depending upon the amount of risk the client is willing to take, design an investment profile for him that includes stocks of differing security. Some clients are willing to assume more risk because the return on these investments is usually higher, while others want moderate-to-low risk investments. Computational analysts work in insurance companies, hedge funds, in asset management, in proprietary trading and in banks.
How Do You Become a Computational Engineer?
Because these positions generally require a master’s degree, people wanting to enter this career should start with a bachelor’s degree in a finance-related field. Courses that would prove helpful are calculus and engineering probability. Applicants to this master’s program should also have strong programming skills. Internships are invaluable as they give students the experience employers demand, and continuing education is important to keep up with the ever-changing technical and financial environments. The Master’s in Engineering Finance can also be specialized several ways from the mathematical research and development of models to the actual provision of face-to-face client services. The Bureau of Labor Statistics gives a median salary for this profession as $95,320. The wage is somewhat dependent upon experience and on geographical location of the position. Most of these jobs are found on the east coast, in Texas and in California.
Although finance is a volatile field, the demand for financial consultants is steady. The profession is competitive and experts recommend that anyone who wants to become a Financial Engineer should begin early to take mathematics, computer science and finance courses to build a foundation for further education.
