If you aspire to be a financial engineering specialist, you have to be a number crunching maniac and a person who loves to read financial reports of companies. In fact reading financial reports and analyzing them to death, along with a super math potential, is the best indicator of aptitude. The schools in the US like Columbia, NYU, Cornell offer graduate programs in Financial Engineering that are known for their rigor and practice. With salaries beginning at $77,000 and touching as much as $400,000 after a few years in the field, financial engineering has become a highly sought after field to pursue a career in finance.
Financial engineering involves the analysis of several factors that affect the performance of the financial sector. A classic example of this expertise is the Black-Scholes Equation Developed in 1973 by Fisher Black, Robert Merton and Myron Scholes, from the University of Chicago, the Black-Scholes Equation is still widely used to determine the value of stock options and derivatives. Regarded as one of the best ways of determining fair prices of options, the model requires five input variables – the strike price of an option, the current stock price, the time to expiration, the risk-free rate and the volatility. The model also assumes that stock prices follow a lognormal distribution as asset prices cannot be negative. Moreover, the model assumes that there are no transaction costs or taxes involved; the risk-free interest rate is constant for all maturities; there are no riskless arbitrage opportunities and short selling of securities with use of proceeds is permitted.
Such are the complexities that govern the field of financial engineering. Financial engineers work for financial institutions, such as banks, investment houses, and mutual fund companies, and must be proficient in applied mathematics, economic theory, statistics, and computer science for success.
They use mathematical and analytical tools to create algorithms that are implemented in financial analysis, and also work to provide financial analyses of their company’s new products and asset classes. Following this, they may suggest program changes if necessary and must be proficient with relevant software and computer applications and Microsoft Office programs (Word, Excel, Power Point and Outlook). Apart from these skills, they should also be able to multitask and work well under pressure.
The job role of a Financial Engineer includes the following:
- Develop analytical systems and strategies for financial decision making.
- Research trends in big data, credit assessment procedures and fiscal services.
- Liaise between clients and professional IT team.
- Provide backend development for analytical processes.l Engineering Salaries
Financial Engineering graduates are employed in key banking and investment sectors. They play a very decisive role in the organizational hierarchy and therefore command a salary ranging from $77,000 initially, which can rise up to USD$150,000. The average pay packets from top rung schools range from $70,000 to $125,000. It is not surprisingly that after a few years of experience, you could end up making anywhere between USD$175,000 to USD$400,000.
These figures, we hope, are enough motivation for you to gear up and do your best.
- You must login to post comments