About this course: Financial Engineering is a multidisciplinary field involving finance and economics, mathematics, statistics, engineering and computational methods. The emphasis of FE & RM Part II will be on the use of simple stochastic models to (i) solve portfolio optimization problems (ii) price derivative securities in various asset classes including equities and credit and (iii) consider some advanced applications of financial engineering including algorithmic trading and the pricing of real options. We will also consider the role that financial engineering played during the financial crisis. We hope that students who complete the course and the prerequisite course (FE & RM Part I) will have a good understanding of the "rocket science" behind financial engineering. But perhaps more importantly, we hope they will also understand the limitations of this theory in practice and why financial models should always be treated with a healthy degree of skepticism.
Created by: Columbia University
Taught by: Martin Haugh, Co-Director, Center for Financial Engineering
Industrial Engineering & Operations Research
Taught by: Garud Iyengar, Professor
Industrial Engineering and Operations Research Department
| Commitment | 13 hours videos and quizzes |
| Language | English |
| How To Pass | Pass all graded assignments to complete the course. |
| User Ratings |
Syllabus
WEEK 1
Mean-Variance Analysis and CAPM
Problem formulation and solution; the efficient frontier; including the risk-free asset; the Capital Asset Pricing Model (CAPM);implications of CAPM: α, β, security and capital market lines
6 videos, 2 readings
Graded: Mean-Variance Analysis and CAPM Problem Set
WEEK 2
Practical Issues in Implementing Mean Variance
Problems with mean-variance analysis; ETFs and leveraged ETFs; VaR and CVaR for asset allocation; survivorship bias, performance evaluation and other statistical pitfalls.
6 videos, 2 readings
Graded: Practical Issues in Implementing Mean Variance Problem Set
WEEK 3
Equity Derivatives in Practice: Part I
Problems with mean-variance analysis; ETFs and leveraged ETFs; VaR and CVaR for asset allocation; survivorship bias, performance evaluation and other statistical pitfalls.
7 videos, 2 readings
Graded: Equity Derivatives in Practice: Part I
WEEK 4
Equity Derivatives in Practice: Part II
More about Black-Scholes, the Greeks and delta-hedging; the volatility surface; pricing derivatives using the volatility surface; model calibration.
5 videos, 1 reading
WEEK 5
Credit Derivatives and Structured Products
Mechanics and pricing of CDOs; exotic structured credit securities including CDO-squared’s and CDO-cubed’s. Risk management of these products and their role in the financial crisis.
9 videos, 2 readings
Graded: Credit Derivatives and Structured Products
WEEK 6
Other Applications of Financial Engineering
Real options; energy and commodities modeling; algorithmic trading.
8 videos, 2 readings
Graded: Other Applications of Financial Engineering
WEEK 7
Background Material
11 videos, 1 reading
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Ratings and Reviews
challenging and useful
Very good introductory course!
Very helpful! Learned a lot about financial modelling! Clear explanation on limitation and how to use it in real life!
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LH
I like most part of this course but some questions are quite confusing and not relevant to how much you understand the course material