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Finacial Engineering

  1. Jan 4, 2005 #1
    Hey.. just came across an article where the person did his MS in Financial engineering.. i have personally not heard of financial engineering and wanted to know what it deals with,etc?

    Any help is appreciated..


    thanks much
     
  2. jcsd
  3. Jan 5, 2005 #2
    Until a financial engineer corrects me... accounting for people who want to sound smarter?
     
  4. Jan 5, 2005 #3

    cronxeh

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    exactapositivelutely

    Here is a short list of courses taken straight from MS curriculum:

    Financial Accounting, Money, Banking and Financial Markets, Microeconomic Foundations of Finance, Investment Banking and Brokerage, Financial Theory with Corporate Applications, Financial Market Regulation, Accounting for Financial Products, Economics for Business Decisions
     
  5. Jan 5, 2005 #4
    hmm strange... how does this related to science in any way then if its just accounting?
     
  6. Jan 5, 2005 #5

    FredGarvin

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    It has nothing to do with science or anything related. It's just another pathetic addition of the word "engineering" to a title to make it sound more appealing and important.
     
  7. Jan 5, 2005 #6

    russ_watters

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    Many schools have an "engineering accounting", or similar major, which is basically accounting for people who washed out of engineering. For example: http://www.lebow.drexel.edu/undergrad/ug_programs/bs_in_ce/

    A quick look over the coursework shows there is a lot of actual engineering coursework - just nothing beyond sophomore level.
     
  8. Jan 5, 2005 #7

    brewnog

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    I took a module in "engineering management" which included engineering accounting, but it was actually quite useful. The management was relevant to project planning, and the finance bit actually gave us a healthy awareness of how accountants often talk out of their arses just to make the numbers look good.
     
  9. Jan 5, 2005 #8
    What are you talking about??? Financial Engineering has nothing to do with accounting. It deals with derivatives, volatility, and Black Scholes Model. For example, one typically learns stochastic calculus, and works to prove something like the Black Scholes Equation. It is not simply accounting.
     
  10. Jan 5, 2005 #9

    russ_watters

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    So did I - and Drexel has an Engineering Management masters, which is basically an MBA for engineers (and I'm considering taking...). It is a useful thing to have as a single class or substitute MBA, but to call a watered-down BS "engneering" is a little misleading/annoying.
     
  11. Jan 5, 2005 #10
    hmmm so what would be the jobs that a financial engineer might get? and how where is this knowledge used practically?


    thanks much
     
  12. Jan 5, 2005 #11
    first of all, financial engineering can be used to provide a model of the behavior of stocks. You can become an economist, or work for companies like The Predictors. Overall it is very useful. Also, many of the concepts in financial engineering spawn from physics like Brownian motion.
     
  13. Jan 5, 2005 #12

    brewnog

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    Didn't say it was, I was just providing a counter argument to the idea that adding the word 'engineering' to a term isn't always misleading!

    At least in the UK, many graduates are recruited into finance from all types of engineering degree, especially for developing things like hedging models for the stock market where graduates from traditional economics/finance degrees don't always have the skills needed.
     
    Last edited: Jan 5, 2005
  14. Jan 6, 2005 #13

    FredGarvin

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    I beg to ask...what differentiates the graduates of this curriculum from any of the other economists out there who are not "engineers" who perform these jobs already? What exactly is being engineered?

    I had two classes on engineering economics. I was glad I took them. They really were quite useful. I'm not about to call myself a CPA because of that.

    From what I have seen of engineering management degrees, they do focus more on engineering settings and situations. I don't find that degree bogus whatsoever.
     
  15. Jan 6, 2005 #14
    how about 'economist' then. isn't that the kind of stuff they do? sounds to me like somebody though 'economist' was a little too dull sounding and wanted to make the job sexier by calling it 'financial engineering'.
     
  16. Jan 6, 2005 #15

    brewnog

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    Possibly.

    I always like to define engineering as "the application of known data, scientific principles and imagination to solve problems optimally". Not very catchy, (and not entirely accurate) but I'm just wondering how many economics graduates use anything other than textbook theories developed from past experience in their work?
     
  17. Jan 6, 2005 #16

    russ_watters

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    Its almost embarassing, but I looked up the word "engineering" in the dictionary to see if I could find any justification for using the word in this way (you'd think I'd already know what it means :redface: ).
    This definition implies to me that the usage in "financial engineering" is def #2 and has a different meaning altogether than in "mechanical engineering." Considering that the word has legal weight (it is illegal to label yourself an "engineer" for professional/legal purposes, ie. getting a building permit, unless you have a P.E. certification), I still agree with the objections of the other engineers here.

    Incidentally, my sister has a degree that sounds very similar to this "financial engineering" - I'm pretty sure its called "business math."
     
    Last edited: Jan 6, 2005
  18. Jan 6, 2005 #17

    brewnog

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    What are the laws in the US about calling yourself an engineer?

    Here in the UK, much to professional disgust, anyone can call themselves an 'engineer', since our dictionary definition includes people who work with or operate anything technical! It's bastardised I know, but it's legitimate.
     
  19. Jan 6, 2005 #18

    cronxeh

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    varies by state ill edit when i google it up later sorry
     
  20. Jan 7, 2005 #19

    FredGarvin

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    It's the same here in the US. The only thing that I know of that is tightly licensed is the use of PE (professional engineer).

    There are thousands of people that call themselves or were given the title of engineer yet have no background or education.
     
  21. Jan 7, 2005 #20
    I would say def #1. Many use heavy math to design financial products. Like many different kind of options and other derivatives. As such, they do an essential role in the formation of capital, the importance of which have been discussed in this thread:
    https://www.physicsforums.com/showthread.php?t=58265

    Other also use heavy math in order to find various inefficiencies and errors in the markets. By exploiting these, the markets then become more efficient. As such, they are essential in the operation of the capital markets.

    http://en.wikipedia.org/wiki/Financial_Engineering
    http://en.wikipedia.org/wiki/Financial_Math [Broken]

    And just pray that they got their risk calculations right, in these days of centrally planned interest rates and government caused debt explosion.

    Another new engineering profession would be Genetic Engineering.
     
    Last edited by a moderator: May 1, 2017
  22. Jan 7, 2005 #21

    russ_watters

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    I only know this because in my particular field it matters what you call yourself and my company recently became incorporated (very small company). We had a form to fill out that said its illegal to have the word "engineer" in the title of the business unless there was a P.E. employed here:
    HERE is what the state of PA has to say on professional certifications.
    Incidentally, section 37.34 lists the legally recognized branches of engineering - all are what we would traditionally expect, ie no "financial engineering."

    The way this works in practice is a little vague and not really followed. For example, there is a relatively new construction process called "design-build" in which the contractor designs the building. That means that either he must have an engineer or get the design approved by an engineer. In practice, that doesn't always happen:

    One of our clients was a school (a school!) and we found some pretty awful code violations caused by a bad design-build contractor. It even said something like "system engineering and design" in the contract. For some inexplicable reason, the school didn't sue them, but paid us to fix it. And none of the parents sued either: when PGW came to shut off the gas because of the safety issues, the guy who came was a parent of a student. Also inexplicable is how they got their building and occupancy permits.

    Another contractor had the slogan "engineers who build" on their business cards. That implies an expertise that they didn't have.

    Now, most engineers will never do anything that carries legal weight - this mostly applies to people who deal with the government, ie. with building codes (I'm sure military procurment has its own system too). And even a large construction engineering firm only needs one or two P.E.'s. But the legal status is still there. For a materials/metalurgical engineer working for Air Products or Bethlehem Steel (my dad, once upon a time), it never matters.
     
    Last edited: Jan 7, 2005
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