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.
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