About this course: 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.
Taught by: Martin Haugh, Co-Director, Center for Financial Engineering
Industrial Engineering & Operations Research
Taught by: Garud Iyengar, Professor
Industrial Engineering and Operations Research Department
| Commitment | 12 hours videos and quizzes |
| Language | English |
| How To Pass | Pass all graded assignments to complete the course. |
| User Ratings |
- Reading: Course Overview
- Reading: About Us
- Video: Course Overview
- Reading: Lesson Supplements
- Video: Introduction to No-arbitrage
- Video: Interest Rates and Fixed Income Instruments
- Reading: Lesson Supplements
- Video: Floating Rate Bonds and Term Structure of Interest Rates
- Video: Forward Contracts
- Reading: Lesson Supplements
- Video: Swaps
- Video: Futures
- Video: Futures Excel
- Reading: Lesson Supplements
- Video: Options
- Video: Options Pricing
- Video: The 1-Period Binomial Model
- Video: Option Pricing in the 1-Period Binomial Model
- Reading: Lesson Supplements
- Video: The Multi-Period Binomial Model
- Video: What’s Going On?
- Video: Pricing American Options
- Video: Replicating Strategies
- Video: Including Dividends
- Video: Pricing Forwards and Futures in the Binomial Model
- Video: The Black-Scholes Model
- Video: An Example: Pricing a European Put on a Futures Contract
- Reading: Quiz Instructions
- Reading: Lesson Supplements
- Video: Introduction to Term Structure Lattice Models
- Video: The Cash Account and Pricing Zero-Coupon Bonds
- Video: Fixed Income Derivatives: Options on Bonds
- Video: Fixed Income Derivatives: Bond Forwards
- Video: Fixed Income Derivatives: Bond Futures
- Video: Fixed Income Derivatives: Caplets and Floorlets
- Video: Fixed Income Derivatives: Swaps and Swaptions
- Video: The Forward Equations
- Reading: Quiz Instructions
- Reading: Lesson Supplements
- Video: Model Calibration
- Video: An Application: Pricing a Payer Swaption in a BDT Model
- Video: Fixed Income Derivatives Pricing in Practice
- Reading: Lesson Supplements
- Video: Modeling Defaultable Bonds
- Video: Pricing Defaultable Bonds
- Video: Credit Default Swaps
- Video: Pricing Credit Default Swaps
- Video: Interview with Emmanuel Derman
- Reading: Quiz Instructions
- Reading: Lesson Supplements
- Video: Introduction to Mortgage Mathematics and Mortgage-Backed Securities
- Video: Prepayment Risk and Mortgage Pass-Throughs
- Video: Mortgage Pass-Throughs in Excel
- Video: Principal-Only and Interest-Only MBS
- Video: Risks of Principal-Only and Interest-Only MBS
- Video: Collateralized Mortgage Obligations (CMOs)
- Video: Pricing Mortgage-Backed Securities
- Reading: Quiz Instructions
- Reading: Lesson Supplements
- Video: Review of Basic Probability
- Video: Review of Conditional Expectations and Variances
- Video: Review of Multivariate Distributions
- Video: The Multivariate Normal Distribution
- Video: Introduction to Martingales
- Video: Introduction to Brownian Motion
- Video: Geometric Brownian Motion
- Video: Review of Vectors
- Video: Review of Matrices
- Video: Review of Linear Optimization
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I have enjoyed this course thoroughly. With a full time job and two young children it has demanded a great deal of juggling but has been worth it. If you appreciate a thorough and clear presentation of essential principles then this is the course for you. The assignments were sufficiently challenging but more importantly they elucidated key points presented in the lectures. I am definitely going to attempt Level 2
This course introduces financial engineering and risk management very adequately. Even though the level is not that advanced, it teaches the mechanics of derivatives, fixed income securities and more complicated securities like MBS. The quizzes are achievable, but don't let the time run up until the deadline since they require attention.
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A lot of useful information in the course. If you've got some programming skills it has even greater impact if you actually write the code yourself to solve the quizzes (still comparing with the solution in Excel). I'd suggest this course to anyone who wants to get a glimpse of the complexities of what Hedge Funds and Front Office desks in Investment Banks actually use.