Financial Engineering

FNEN 6210

Portfolio Management

This course deals with portfolios of financial assets such as stocks and bonds. It explores the basic principles underlying rational portfolio choice and what these mean for prices determined in the marketplace. Much of the analysis developed in the course is equally applicable to real assets. The first part of this course is devoted to the problems of decision-makers - how to structure their problems so that they are left with a manageable number of alternatives. The second part of the course deals with rational choice among these alternatives, methods for implementing and controlling the decision process, and equilibrium conditions in the capital markets to which the previous analysis leads. The course takes a rigorous approach to portfolio management and builds upon the use of symbolic and numerical tools. Maple will be used from the very beginning as a computer algebra system and then as a generator of codes in C++ and/or FORTRAN.

FNEN 6810

Derivative Securities

This course blends theory and practice that incorporates a new approach to teaching derivative securities. A unified approach to option pricing utilizing Maple's symbolic power and its connection to numerical valuation is presented. This is an advanced course combining theory and practice of pricing and hedging derivative securities. The course emphasizes the applications of financial engineering and covers option and futures pricing theory and practice. Institutional material will be assigned mostly as reading material and the course will concentrate on the theory and practical applications of currency and commodity derivatives, as well as exotic options.

*FNEN 6820

Advanced Derivative Securities

This course covers a list of advanced topics in derivative securities with a focus on pricing and hedging. Students are assumed to have taken an introductory course in derivatives. The objective of this course is to develop modeling skills needed to value the full range of derivative securities: from exchange-traded options to over-the-counter products including exotic options, embedded options and credit derivatives. The fundamental theory is the Equivalent Martingale Pricing Principle or the Risk-neutral valuation by no-arbitrage. Analytical models and various numerical methods will be discussed in detail. It is assumed that students are familiar with the Black-Scholes and binomial pricing models.

*This is not a mandatory course, but is strongly recommended.

FNEN 6840

Enterprise-wide Financial Risk Management

This course provides a comprehensive introduction to the discipline of financial risk management. It covers the market and regulatory trends that have motivated the need for financial institutions and corporations to evolve from traditional desk level risk management to an enterprise-wide function spanning all sources of risk in a consistent manner. Students will learn the fundamentals required to support a general risk management process in addition to gaining an understanding of industry best-practice methodologies. The course will cover in depth the analytics of standard risk assessment techniques for market risk, credit risk and operational risk as well as introducing the leading edge tools used to manage the overall business process.

FNEN 6850

Fixed Income Securities

The course builds upon the use of symbolic (Maple) and numerical (MatLab) tools. Maple is used as a computer algebra system and then as a generator of codes in C++ and/FORTRAN. This course provides an overview of the major components of fixed income markets, including a review of the major instruments, the issuers and the investors. The valuation of interest-rate sensitive cash flows is the underlying theme. Major topics covered include: theories of the term structure, institutional aspects of the fixed income markets, and analytical techniques for managing interest rate risk. The course will concentrate on modern valuation methods as well as traditional techniques for risk management in the fixed income market. The effect of the assumed interest rate dynamics and the prevailing interest rate condition for the riskiness and value of various features of these contracts will also be analyzed. The power of convexity and duration upon risk management and valuation will be developed. Students will use the substantive approaches developed in the course to address concrete problems.

OMIS 6000

Models and Applications in Operational Research

This course provides a survey of selected topics in operational research (OR). Emphasis is placed on the practical application of OR tools rather than on the mathematical properties. Application areas include: financial planning and portfolio selection, production, priority planning and marketing. Topics include: linear programming and its applications; programming to achieve a set of goals or targets with applications in finance and production; capital budgeting and project selection; transportation and network models; and portfolio models.

MATH 6910

Stochastic Calculus in Finance

The objective of this course is to provide the basic ideas and methods of stochastic calculus and to apply these methods to financial models. In this course, we first introduce the concepts of arbitrage and risk-neutral pricing in a discrete-time setting. In addition, we cover the following topics: Brownian Motion, Stochastic Integrals, Ito's Formula, Martingales. Throughout the semster, this course covers fundamental techniques for pricing and hedging derivative securities.

MATH 6911

Numerical Methods in Finance

Background materials in partial differential equations: classifications of elliptic, parabolic and hyperbolic equations; examples of exact solutions including the Black-Scholes equations and perpetual puts; information flow and propogation for problems in finance. Finite difference methods for parabolic equations; explicit methods; implicit methods, including Backward Euler method and Crank-Nicolson method; issues of stability and convergence; applications to finance, including the effects of boundary conditions, dividends and transaction costs; degeneracy and Asian option, higher order discretization techniques.

CSE 5910

Software Foundations

This course introduces object-oriented programming (e.g. Java or C++) and the basic principles of software development to non-Computer Science students already familiar with programming. Web technologies for the collection and dissemination of knowledge will be introduced and studied. The Unix programming environment will be used.

NOTE:  Students may waive this course and replace it with FNEN 6820 - Advanced Derivatives.  Waiver with replacement requests need to be made in writing to the Director and should include relevant courses to support the waiver with replacement request.

Suggested Courses:

Not mandatory courses, but strongly recommended.

FINE 6310

Econometrics of Financial Markets

The objective of this course is to familiarize the students with various statistical methods needed to undertake practitioner-type research in finance. This course is empirically oriented and is geared towards students with a solid math and statistics background who are interested in a career in financial industry or finance research.

OMIS 6350

Advanced Spreadsheet Modelling & Programming for Business

This course enables the design, development, and implementation of integrated business analysis systems by combining the extended functionality of spreadsheets with the Visual Basic for Applications (VBA) programming language. The course demonstrates the power of combining the advanced analysis and modelling techniques of spreadsheets and VBA through applications to several practical problems for disparate business functions.