Financial Engineering is a multidisciplinary field involving finance and
economics, mathematics, statistics, engineering and computational
methods. The emphasis of this course will be on the use
of simple stochastic models and optimization for portfolio optimization,
derivatives pricing and risk management.
Our examples will draw from many asset classes including equities, fixed
income, credit, mortgage-backed securities and structured products.
We will also consider the role that some of these asset classes played
during the financial crisis. If time permits, we will also discuss other
applications including real options, energy and commodities modeling,
and algorithmic trading among others. We will also feature some interview
modules with Emanuel Derman, the renowned ``quant'' and best-selling
author of "My Life as a Quant".
We hope that students who complete the course 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.