Financial Engineering and Risk Management Part I from Coursera

Financial Engineering is a multidisciplinary field drawing from finance and economics, mathematics, statistics, engineering and computational methods. The emphasis of FE & RM Part I will be on the use of simple stochastic models to price derivative securities in various asset classes including equities, fixed income, credit and mortgage-backed securities. We will also consider the role that some of these asset classes played during the financial crisis. A notable feature of this course will be an interview module 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 begin to understand 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. The follow-on course FE & RM Part II will continue to develop derivatives pricing models but it will also focus on asset allocation and portfolio optimization as well as other applications of financial engineering such as real options, commodity and energy derivatives and algorithmic trading.

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Introduces mathematical methods for pricing derivative instruments in different asset classes, which is widely used in finance industry

Features an interview session with a renowned quant and best-selling author, providing practical insights

Emphasizes the limitations of financial models, promoting critical thinking and skepticism

Teaches core stochastic models used for pricing derivative securities

Requires a solid background in finance, economics, mathematics, statistics, and computational methods

May be more suitable for those interested in pursuing careers in financial engineering or related fields

Reviews summary

Technical and practical finance course

Financial Engineering and Risk Management Part I is a well-received course that provides learners with both the theoretical and practical aspects of finance and risk management. The course is taught by experienced professionals and features real-world examples and case studies. Students appreciate the course's challenging material, which prepares them for careers in the financial industry.

Real-world examples and case studies

Experienced professionals

"Excellent lecturers with practical insight!"

Technically challenging but insightful

"The material in Financial Engineering and Risk Management, Parts I and II, is very challenging to say the least,..."

Advanced concepts

"It was a great course, a bit advanced though."

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 Financial Engineering and Risk Management Part I with these activities:

Review Probability and Statistics

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Recall key ideas from probability and statistics to strengthen your knowledge of the mathematical building blocks of financial engineering.

Browse courses on Probability

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Review probability distributions, such as the normal, binomial, and Poisson distributions.
Practice calculating probabilities and expected values.
Recall hypothesis testing and confidence intervals.

Explore Python for Finance

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Gain familiarity with Python libraries and tools commonly used in financial engineering for data analysis and modeling.

Browse courses on Python

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Follow tutorials on installing Python and essential libraries.
Explore data visualization with libraries like Pandas and Matplotlib.
Practice using NumPy for numerical computations.

Read 'Options, Futures, and Derivatives' by John C. Hull

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Expand your understanding of derivatives by delving into a comprehensive textbook that covers the fundamentals and advanced concepts in the field.

View Options, Futures, and Other Derivatives on Amazon

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Read chapters relevant to the course topics.
Summarize key concepts and formulas.
Solve practice problems to reinforce your understanding.

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Compile a Glossary of Financial Engineering Terms

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Enhance your vocabulary and understanding of key concepts by compiling a glossary of relevant financial engineering terms.

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Collect and define essential financial engineering terms.
Organize the terms alphabetically or by category.
Share your glossary with peers for feedback and discussion.

Solve Practice Problems on Derivative Pricing

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Reinforce your understanding of derivative pricing concepts by solving a variety of practice problems.

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Use Black-Scholes for European and American option pricing.
Value interest rate derivatives using binomial trees.

Join a Study Group for FE & RM

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Engage with peers to discuss course material, share perspectives, and enhance understanding through collaborative learning.

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Find or form a study group with fellow learners.
Meet regularly to review concepts, solve problems, and exchange ideas.

Build a Portfolio Optimization Model

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Apply your knowledge of financial engineering to develop a model that optimizes an investment portfolio based on specified criteria.

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Define your investment goals and risk tolerance.
Research and select suitable asset classes.
Create a model to calculate portfolio returns and risks.
Use optimization techniques to determine the optimal portfolio allocation.

Develop a Financial Risk Management Plan

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Apply your knowledge of financial engineering to create a comprehensive risk management plan that addresses potential financial risks and their mitigation strategies.

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Identify potential financial risks, such as market risk, credit risk, and operational risk.
Develop strategies to mitigate identified risks.
Create a plan to monitor and control financial risks.

Career center

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

Risk Manager

Risk Managers identify, assess, and mitigate financial risks. They work for banks, investment firms, and other financial institutions. The Financial Engineering and Risk Management Part I course can help you develop the skills and knowledge needed to manage financial risks. This course will also help you understand the regulatory environment for financial institutions.

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Quantitative Analyst

Quantitative Analysts use mathematical and statistical models to analyze financial data. They develop trading strategies and risk management tools for investment firms. The Financial Engineering and Risk Management Part I course can help you build a strong foundation in the mathematics and statistics used by Quantitative Analysts. This course will also help you develop the programming skills needed to implement and test financial models.

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Financial Analyst

Financial Analysts use economic and financial data to identify investment opportunities. They make recommendations to individuals and institutions on what stocks, bonds, or other investments to buy or sell. The Financial Engineering and Risk Management Part I course can help you understand the complex financial models and risk management techniques used by Financial Analysts. This course will also help you develop the critical thinking and problem-solving skills needed to succeed in this role.

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Portfolio Manager

Portfolio Managers make investment decisions for individuals and institutions. They manage portfolios of stocks, bonds, and other investments. The Financial Engineering and Risk Management Part I course can help you understand the financial models and risk management techniques used by Portfolio Managers. This course will also help you develop the investment decision-making skills needed to succeed in this role.

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Investment Banker

Investment Bankers provide financial advice to corporations and governments. They help companies raise capital and mergers and acquisitions. The Financial Engineering and Risk Management Part I course can help you understand the financial models and risk management techniques used by Investment Bankers. This course will also help you develop the communication and interpersonal skills needed to succeed in this role.

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Insurance Actuary

Insurance Actuaries use mathematical and statistical models to assess the risks of insurance policies. They help insurance companies determine the premiums to charge for policies. The Financial Engineering and Risk Management Part I course can help you develop the skills and knowledge needed to become an Insurance Actuary. This course will also help you understand the insurance industry.

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Financial Consultant

Financial Consultants provide financial advice to individuals and businesses. They help clients with a variety of financial planning needs, such as retirement planning, estate planning, and investment planning. The Financial Engineering and Risk Management Part I course can help you develop the skills and knowledge needed to provide financial advice. This course will also help you understand the regulatory environment for financial advisors.

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Credit Analyst

Credit Analysts assess the creditworthiness of borrowers. They work for banks and other financial institutions to determine whether to lend money to businesses and individuals. The Financial Engineering and Risk Management Part I course may be helpful for Credit Analysts who want to expand their knowledge of financial models and risk management techniques.

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Financial Planner

Financial Planners help individuals and families achieve their financial goals. They provide advice on a variety of financial topics, such as retirement planning, estate planning, and investment planning. The Financial Engineering and Risk Management Part I course may be helpful for Financial Planners who want to expand their knowledge of financial models and risk management techniques.

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Data Scientist

Data Scientists use data to solve business problems. They work for a variety of industries, including finance, healthcare, and retail. The Financial Engineering and Risk Management Part I course may be helpful for Data Scientists who want to specialize in financial data analysis.

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Actuary

Actuaries use mathematical and statistical models to assess the risks of insurance policies. They work for insurance companies to determine the premiums to charge for policies. The Financial Engineering and Risk Management Part I course may be helpful for Actuaries who want to expand their knowledge of financial models and risk management techniques.

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Software Engineer

Software Engineers design, develop, and maintain software systems. They work for a variety of industries, including finance, healthcare, and retail. The Financial Engineering and Risk Management Part I course may be helpful for Software Engineers who want to specialize in developing financial software.

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Economist

Economists study the production, distribution, and consumption of goods and services. They work for a variety of industries, including government, academia, and business. The Financial Engineering and Risk Management Part I course may be helpful for Economists who want to specialize in financial economics.

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Operations Research Analyst

Operations Research Analysts use mathematical and statistical models to solve business problems. They work for a variety of industries, including finance, healthcare, and manufacturing. The Financial Engineering and Risk Management Part I course may be helpful for Operations Research Analysts who want to specialize in financial operations.

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Market Researcher

Market Researchers study the market for goods and services. They collect and analyze data to understand consumer behavior. The Financial Engineering and Risk Management Part I course may be helpful for Market Researchers who want to specialize in financial market research.

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