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Financial Engineering and Risk Management Part I

Approx. 18 hours to complete

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Course Summary

Learn the principles of financial engineering and develop the skills to apply them to real-world situations. This course covers the fundamentals of mathematical finance and financial instruments, as well as risk management and portfolio optimization.

Key Learning Points

Understand the basic principles of financial engineering and how to apply them to real-world situations
Learn about financial instruments such as stocks, bonds, and derivatives
Develop skills in risk management and portfolio optimization

Learning Outcomes

Apply mathematical finance principles to real-world situations
Analyze and manage financial risk
Optimize investment portfolios

Prerequisites or good to have knowledge before taking this course

Basic knowledge of calculus and probability theory
Familiarity with financial markets and instruments

Course Difficulty Level

Intermediate

Course Format

Online Self-Paced
Video Lectures
Quizzes and Assignments

Similar Courses

Financial Markets
Investment Management
Options Trading Strategies

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Related Books

Description

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.

Outline

Course Overview
Course Overview
Course Overview
About Us

Introduction to Basic Fixed Income Securities
Introduction to No-arbitrage
Interest Rates and Fixed Income Instruments
Floating Rate Bonds and Term Structure of Interest Rates
Forward Contracts
Lesson Supplements
Lesson Supplements
Introduction to Basic Fixed Income Securities

Introduction to Derivative Securities
Swaps
Futures
Futures Excel
Options
Options Pricing
The 1-Period Binomial Model
Option Pricing in the 1-Period Binomial Model
Lesson Supplements
Lesson Supplements
Introduction to Derivative Securities

Option Pricing in the Multi-Period Binomial Model
The Multi-Period Binomial Model
What’s Going On?
Pricing American Options
Replicating Strategies
Including Dividends
Pricing Forwards and Futures in the Binomial Model
The Black-Scholes Model
An Example: Pricing a European Put on a Futures Contract
Lesson Supplements
Quiz Instructions
Option Pricing in the Multi-Period Binomial Model

Term Structure Models I
Introduction to Term Structure Lattice Models
The Cash Account and Pricing Zero-Coupon Bonds
Fixed Income Derivatives: Options on Bonds
Fixed Income Derivatives: Bond Forwards
Fixed Income Derivatives: Bond Futures
Fixed Income Derivatives: Caplets and Floorlets
Fixed Income Derivatives: Swaps and Swaptions
The Forward Equations
Lesson Supplements
Quiz Instructions
Term Structure Models I

Term Structure Models II and Introduction to Credit Derivatives
Model Calibration
An Application: Pricing a Payer Swaption in a BDT Model
Fixed Income Derivatives Pricing in Practice
Modeling Defaultable Bonds
Pricing Defaultable Bonds
Credit Default Swaps
Pricing Credit Default Swaps
Interview with Emmanuel Derman
Lesson Supplements
Lesson Supplements
Quiz Instructions
Term Structure Models II and Introduction to Credit Derivatives

Introduction to Mortgage Mathematics and Mortgage-Backed Securities
Introduction to Mortgage Mathematics and Mortgage-Backed Securities
Prepayment Risk and Mortgage Pass-Throughs
Mortgage Pass-Throughs in Excel
Principal-Only and Interest-Only MBS
Risks of Principal-Only and Interest-Only MBS
Collateralized Mortgage Obligations (CMOs)
Pricing Mortgage-Backed Securities
Lesson Supplements
Quiz Instructions
Introduction to Mortgage Mathematics and Mortgage-Backed Securities

Background Material
Review of Basic Probability
Review of Conditional Expectations and Variances
Review of Multivariate Distributions
The Multivariate Normal Distribution
Introduction to Martingales
Introduction to Brownian Motion
Geometric Brownian Motion
Review of Vectors
Review of Matrices
Review of Linear Optimization
Lesson Supplements

Summary of User Reviews

Financial Engineering 1 is a highly recommended course by many students. The course provides a comprehensive understanding of financial engineering concepts and techniques with real-world applications. Many students found the course to be engaging, informative, and practical.

Key Aspect Users Liked About This Course

The course provides practical and real-world applications of financial engineering concepts and techniques.

Pros from User Reviews

Engaging and informative course content
Real-world applications of financial engineering concepts
Well-structured and organized course
Great instructors with in-depth knowledge of the subject

Cons from User Reviews

The course may be challenging for beginners
Some students found the course to be too theoretical
The course may require a significant time commitment
Limited interaction with instructors and fellow students
Course materials may not be updated regularly

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