Applications of Financial Engineering - A Bird's Eye View By
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Date
2014
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Abstract
Financial Engineering is the use of mathematical techniques to solve financial problems. Financiat
I engineering uses tools and knowledge from the fields of computer science, statistics, economics and applied
mathematics to address current financial issues as well as to devise new and innovative financial products. Financial
engineering is sometimes referred to as quantitative analysis and is used by regular commercial banks, investment
banks, insurance agencies and hedge funds. Financial engineering has led to the explosion of derivative trading that
we see today. Since the Chicago Board Options Exchange was formed in 1973 and two of the first financial
engineers, Fischer Black and Myron Scholes, published their option pricing model, trading in options and other
derivatives has grown dramatically. Financial engineering makes use of heavy duty quantitative tools, the uses for
which were once thought to be limited to physics and engineering. But also included In the financial engineer's tool
kit is the entire spectrum of financial instruments. Perhaps most important among these financial instruments are
derivatives. Financial Engineering addresses financial issues in all areas of finance including corporate finance, asset
I management,investmentfinance,andfinancialinstitutions.