What is Financial Engineering?

A financial engineer is someone who uses computer programming, finance, and mathematics to analyze financial assets. Many financial engineers specialize in specific areas of finance such as trading, risk management, asset management, and corporate finance. Some popular positions are algorithmic trader, derivatives trader, strategist, finance software engineer, proprietary trader, hedge fund managers, and risk manager. Risk management is a very broad area which could be a job for an investment bank, hedge fund, or any financial or corporate institutions who is looking to manage their risk in financial assets.

Financial engineering is relatively new and the father of financial engineering is Fischer Black. There are about 22 master programs in North America and data about these programs and rankings can be found on QuantNet.com. The field has been controversial in the news lately since most derivatives are created or transacted by financial engineers.

For anyone who is interested in learning more about the field I would recommend reading two books. The most influential book I have ever read is a book about Fischer Black called Fischer Black and the Revolutionary Idea of Finance. Fischer Black based his life on the CAPM model and the pursuit for knowledge. Financial engineering is all about creating new models and theories which can be seen in Fischer Black's life. If you are considering financial engineering and don’t eat, sleep, and dream about finance I would not recommend pursuing it. The average salary is fairly high and the growth potential is good but only for those who are dedicated.

The second book is My Life as a Quant by Emanuel Derman. The book is about Emanuel Derman’s life and how he became a quant. He like many financial engineers that helped start the field were from quantitative fields such as physics. He now teaches at Columbia University and has contributed to the field in many ways as a professor and practitioner.

The road to becoming a financial engineer is long and hard. A master is a minimum requirement for quant positions at investment banks and other financial institutions. The programs are getting more competitive every year as students from around the world are competing to become financial engineers. There are also more programs being created to meet the high demand for financial engineers but be wary since where you go matters just as much as what you know and who you know.

Please feel free to leave comments or ask questions.

Dimitri Bianco Update

Below is a copy of the letter that has been sent out to my close contacts about what I am doing in regards to Financial Engineering.

Everyone,

            As many of you know after graduating from WSU I have been pursuing a career as a trader on Wall Street. I applied to over 170 jobs and have networked with many people. I learned from many rejections as well as advice from network contacts that I needed more education in financial engineering as Wall Street shifts toward quantitative analysis. I applied to seven schools and have been accepted to the Claremont Graduate University and the University of Michigan. I will be accepting the offer from the University of Michigan and will be starting school July 2^nd.

            I would like to give a special thanks to those that wrote recommendation letters; Steve Matthews (family friend and corporate lawyer at PRS), Dr. Donna Paul (my corporate finance professor at WSU), and Dr. Gene Lai (my financial modeling professor at WSU). I would also like to thank Ron Vodika for changing the way I look at life and gaining a desired career; Nathan Soper for giving advice, a job interview, and helping me to create a great resume; Emanuel Derman’s book My Life As A Quant which has motivated me by his life as an example; Fischer Black’s life and ideas as portrayed in the book Fischer Black and the Revolutionary Idea of Finance which has been the most influential source on my outlook of life and education; my parents for a place to stay, a job, and for being my parents; my many networking contacts that have made impressions on me; and last the most important, my wife Arielle for supporting me and motivating me when times looked grim. 

Again thank you to everyone for helping me get to where I am in my journey. I will send out major updates as I progress.

For updates, my thoughts, and research please visit my blog biancomarketresearch.blogspot.com

Sincerely,

Dimitri Bianco

Arielle and myself at WSU.
Special thanks to Matt Holmes for the taking the picture.

Arielle and I are very excited to move to Ann Arbor, Michigan!