Introduction to Financial Engineering and Risk Management from Coursera

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Syllabus

Course Overview

Welcome to Financial Engineering and Risk Management

Pre-Requisite Materials

Welcome to Week 2! This week, we will cover mathematical foundations that are necessary for the study of future modules. In a nutshell, we will introduce probabilities and optimization. The theory of probability is the mathematical language to characterize uncertainties, e.g. how to describe the chances that the price of a particular stock will go up tomorrow. To make things precise, we need probabilities. Optimization is a set of toolkits that allow us to search for optimal solutions. For example, given a budget constraint, how do we maximize the profit? We need mathematical optimization. Financial engineers apply probabilistic models to capture the regularities of financial products, and apply optimization techniques to optimize their strategies. These mathematical toolkits will serve as a cornerstone for your financial engineering career.

Introduction to Basic Fixed Income Securities

Welcome to Week 3! This week, we officially embark on the journey of financial engineering and risk management. We will start with the fundamentals of financial engineering, i.e. the principles of pricing. In financial markets, given a financial product, how do we calculate its prices? These pricing principles will serve as the cornerstone of our future modules. We will also cover the basics of fixed income instruments, which serve as the building blocks of financial markets. If you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)

Introduction to Derivative Securities

Welcome to Week 4! This week, we will cover a new family of financial products: derivative securities. Derivative securities, as the name suggests, are financial products that derive their value from some underlying assets, such as interest rates or stocks. The prosperity of modern financial markets is due in large part to the wide variety of derivative securities on the markets such as forwards, futures, swaps, and options as we will introduce in this module. We will also introduce the 1-period binomial model, a simplified framework that allows us to calculate the prices of derivative securities. Despite its simplicity, 1-period binomial model is the building block of more powerful pricing models as we will find out in future modules. As always, if you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)

Option Pricing in the Multi-Period Binomial Model

Welcome to Week 5! This week, we will continue from the last module, and extend from the 1-period binomial model to the multi-period binomial model. Multi-period binomial model is nothing but stacking multiple 1-period binomial models together. We will see how this simple construction allows us to price financial products over long horizons. As an illustrative example, we will price the American options using the multi-period model. Moreover, we will cover more advanced pricing models such as the Black Scholes model. We will see how the Black Scholes model is a natural extension of the multi-period binomial model and is widely applicable in practice. As always, if you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)

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Taught by Martin Haugh, Garud Iyengar, Ali Hirsa, who are recognized for their work in Financial Engineering and Risk Management

Suitable for learners who have a basic understanding of fixed income securities, derivatives, and their respective pricing models

Introduces the 1-period Binomial Model, a simplified framework for calculating the prices of derivative securities

Explores advanced pricing models such as the Black Scholes model, which is widely applicable in practice

Requires learners to have a good foundation in probability and optimization

May not be suitable for learners with no prior knowledge or experience in financial engineering and risk management

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Introduction to Financial Engineering and Risk Management with these activities:

Review Probability and Optimization

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Ensure a strong foundation in prerequisite concepts to enhance your understanding of subsequent modules.

Browse courses on Probability

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Review materials on probability distributions, random variables, and statistical inference
Review materials on linear programming, nonlinear programming, and optimization algorithms

Compile a Cryptocurrency Data Analysis Resource List

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Gain a comprehensive overview of resources for analyzing cryptocurrency data, enhancing your ability to extract insights and make informed decisions.

Browse courses on Financial Markets

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Gather resources on cryptocurrency data sources
Include tools and techniques for data analysis
Organize the resources into a structured and accessible format

Practice Swap and Option Pricing

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Reinforce your understanding of swap and option pricing through repetitive exercises, improving your accuracy and speed in solving these problems.

Browse courses on Option Pricing

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Solve practice problems on swap pricing using the Black model
Solve practice problems on option pricing using the Black-Scholes model

Three other activities

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Create a Term Structure Model

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Apply the concepts of term structure of interest rates to a practical project, deepening your understanding and ability to apply in the real world.

Browse courses on Term Structure of Interest Rates

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Choose a term structure model (e.g., Vasicek, CIR, Hull-White)
Implement the model in a programming language (e.g., Python, R)
Calibrate the model to market data
Use the model to price fixed income securities

Follow Tutorials on Advanced Option Pricing Models

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Expand your knowledge of option pricing beyond the covered models by exploring advanced techniques.

Browse courses on Option Pricing

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Find tutorials on advanced option pricing models (e.g., Monte Carlo simulation, finite difference methods)
Follow the tutorials and implement the models
Apply the models to practical option pricing problems

Contribute to an Open-Source Financial Engineering Library

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Gain practical experience and contribute to the open-source community by working on financial engineering projects.

Browse courses on Financial Engineering

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Identify an open-source financial engineering library (e.g., QuantLib, Finmath)
Find an issue or feature to contribute to
Implement the contribution
Submit a pull request to the project

Career center

Learners who complete Introduction to Financial Engineering and Risk Management will develop knowledge and skills that may be useful to these careers:

Risk Analyst

Risk analysts identify, assess, and mitigate risks within organizations. They develop and implement risk management strategies to protect against potential losses. This course will provide you with the tools and techniques needed to become a successful risk analyst. You will learn about risk assessment, risk modeling, and risk mitigation.

See salaries and explore the career path for Risk Analyst

Quant Analyst

Quant analysts use mathematical and statistical models to analyze financial data and develop trading strategies. They play a critical role in hedge funds and investment banks. This course will provide you with the quantitative skills needed to succeed as a quant analyst. You will learn about probability, statistics, and financial modeling.

See salaries and explore the career path for Quant Analyst

Financial Risk Manager

Financial risk managers identify, assess, and mitigate financial risks within organizations. They develop and implement risk management strategies to protect against potential losses. This course will provide you with the tools and techniques needed to become a successful financial risk manager. You will learn about risk assessment, risk modeling, and risk mitigation.

See salaries and explore the career path for Financial Risk Manager

Portfolio Manager

Portfolio managers manage investment portfolios for individuals and institutions. They make investment decisions based on their clients' financial goals and risk tolerance. This course will provide you with the knowledge and skills needed to become a successful portfolio manager. You will learn about portfolio management, investment analysis, and risk management.

See salaries and explore the career path for Portfolio Manager

Financial Analyst

Financial analysts provide investment advice and recommendations to clients. They analyze financial data and market trends to identify investment opportunities and make informed decisions. This course will help you develop the analytical and quantitative skills needed to succeed as a financial analyst. You will learn how to evaluate financial statements, build financial models, and assess risk.

See salaries and explore the career path for Financial Analyst

Investment Banker

Investment bankers provide financial advice and services to corporations and governments. They help raise capital, merge and acquire companies, and manage investments. This course will provide you with the knowledge and skills needed to become a successful investment banker. You will learn about corporate finance, financial modeling, and capital markets.

See salaries and explore the career path for Investment Banker

Actuary

Actuaries use mathematical and statistical models to assess financial risk and uncertainty. They play a critical role in developing insurance policies, pricing financial products, and managing investment portfolios. This course provides a solid foundation in probability, optimization, and financial modeling, which are essential skills for actuaries. By understanding the principles of financial engineering and risk management, you can gain the knowledge and tools needed to succeed in this field.

See salaries and explore the career path for Actuary

Financial Advisor

Financial advisors help individuals and families manage their finances and make sound investment decisions. They provide personalized financial advice and guidance based on their clients' goals and risk tolerance. This course will provide you with the knowledge and skills needed to become a successful financial advisor. You will learn about financial planning, investment management, and risk mitigation.

See salaries and explore the career path for Financial Advisor

Trader

Traders buy and sell financial instruments for their own account or on behalf of their clients. They make trading decisions based on their analysis of financial markets and economic trends. This course will provide you with the knowledge and skills needed to become a successful trader. You will learn about financial markets, trading strategies, and risk management.

See salaries and explore the career path for Trader

Data Analyst

Data analysts collect, clean, and analyze data to identify trends and patterns. They use their findings to make informed decisions and solve business problems. This course will provide you with the analytical and quantitative skills needed to succeed as a data analyst. You will learn about data analysis techniques, data visualization, and statistical modeling.

See salaries and explore the career path for Data Analyst

Financial Planner

Financial planners help individuals and families manage their finances and achieve their financial goals. They provide personalized financial advice and guidance based on their clients' goals and risk tolerance. This course may be useful for financial planners who want to learn more about financial engineering and risk management.

See salaries and explore the career path for Financial Planner

Economist

Economists study the production, distribution, and consumption of goods and services. They use their knowledge of economic principles to analyze economic data and make predictions about the future. This course may be useful for economists who want to specialize in financial economics or work in the financial industry.

See salaries and explore the career path for Economist

Statistician

Statisticians collect, analyze, and interpret data. They use their knowledge of statistical methods to draw conclusions about the world around them. This course may be useful for statisticians who want to specialize in financial statistics or work in the financial industry.

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Operations Research Analyst

Operations research analysts use mathematical and analytical techniques to solve business problems. They develop models and simulations to optimize operations and improve efficiency. This course may be useful for operations research analysts who want to work in the financial industry or develop financial models.

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Software Engineer

Software engineers design, develop, and maintain software systems. They use their knowledge of computer science and engineering principles to create software solutions for a variety of industries. This course may be useful for software engineers who want to develop financial software or work in the financial industry.

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Introduction to Financial Engineering and Risk Management

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