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Intro

Financial Engineering and Risk Management Part II

 with  Martin Haugh and Garud Iyengar
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.

Syllabus

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

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.

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.

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.

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.

Other Applications of Financial Engineering
Real options; energy and commodities modeling; algorithmic trading.

Background Material


3 Student
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Cost Free Online Course (Audit)
Pace Upcoming
Subject Finance
Institution Columbia University
Provider Coursera
Language English
Certificates Paid Certificate Available
Hours 7-10 hours a week
Calendar 7 weeks long
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3 reviews

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0 out of 1 people found the following review useful
2 years ago
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John Walsh partially completed this course and found the course difficulty to be very hard.
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0 out of 1 people found the following review useful
a year ago
Rohit Mendiratta completed this course.
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2 years ago
Zulqarnain Haider Shah is taking this course right now, spending 2 hours a week on it and found the course difficulty to be medium.
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