About this course: Financial Engineering is a multidisciplinary field involving finance and economics, mathematics, statistics, engineering and computational methods. The emphasis of FE & RM Part II will be on the use of simple stochastic models to (i) solve portfolio optimization problems (ii) price derivative securities in various asset classes including equities and credit and (iii) consider some advanced applications of financial engineering including algorithmic trading and the pricing of real options. We will also consider the role that financial engineering played during the financial crisis. We hope that students who complete the course and the prerequisite course (FE & RM Part I) will have a good understanding of 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.

Created by: Columbia University

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	13 hours videos and quizzes
Language	English
How To Pass	Pass all graded assignments to complete the course.
User Ratings	4.7 stars Average User Rating 4.7See what learners said

Syllabus

WEEK 1

Mean-Variance Analysis and CAPM

Problem formulation and solution; the efficient frontier; including the risk-free asset; the Capital Asset Pricing Model (CAPM);implications of CAPM: α, β, security and capital market lines

6 videos, 2 readings

Graded: Mean-Variance Analysis and CAPM Problem Set

WEEK 2

Practical Issues in Implementing Mean Variance

Problems with mean-variance analysis; ETFs and leveraged ETFs; VaR and CVaR for asset allocation; survivorship bias, performance evaluation and other statistical pitfalls.

6 videos, 2 readings

Graded: Practical Issues in Implementing Mean Variance Problem Set

WEEK 3

Equity Derivatives in Practice: Part I

Problems with mean-variance analysis; ETFs and leveraged ETFs; VaR and CVaR for asset allocation; survivorship bias, performance evaluation and other statistical pitfalls.

7 videos, 2 readings

Graded: Equity Derivatives in Practice: Part I

WEEK 4

Equity Derivatives in Practice: Part II

More about Black-Scholes, the Greeks and delta-hedging; the volatility surface; pricing derivatives using the volatility surface; model calibration.

5 videos, 1 reading

WEEK 5

Credit Derivatives and Structured Products

Mechanics and pricing of CDOs; exotic structured credit securities including CDO-squared’s and CDO-cubed’s. Risk management of these products and their role in the financial crisis.

9 videos, 2 readings

Graded: Credit Derivatives and Structured Products

WEEK 6

Other Applications of Financial Engineering

Real options; energy and commodities modeling; algorithmic trading.

8 videos, 2 readings

Graded: Other Applications of Financial Engineering

WEEK 7

Background Material

11 videos, 1 reading

FAQs

How It Works

Coursework

Each course is like an interactive textbook, featuring pre-recorded videos, quizzes and projects.

Help from Your Peers

Connect with thousands of other learners and debate ideas, discuss course material, and get help mastering concepts.

Certificates

Earn official recognition for your work, and share your success with friends, colleagues, and employers.

Creators

Columbia University

For more than 250 years, Columbia has been a leader in higher education in the nation and around the world. At the core of our wide range of academic inquiry is the commitment to attract and engage the best minds in pursuit of greater human understanding, pioneering new discoveries and service to society.

Ratings and Reviews

Rated 4.7 out of 5 of 283 ratings

Some tasks were unclear, but overall great course

It is a very good course with excellent learning materials and video lectures. For anyone interested to know about financial risk management and derivatives, it is a very good course with examples and practical exercises!

I like most part of this course but some questions are quite confusing and not relevant to how much you understand the course material

challenging and useful

Share

Financial Engineering and Risk Management Part II

Financial Engineering and Risk Management Part II

Financial Engineering and Risk Management Part II