A financial engineer works for financial services companies either in-house or as an outside consultant. Career opportunities in research, academic and industrial sectors may also be available to someone with this title. Education, knowledge, and experience in areas such as capital markets, financial technology, and computational finance allow many qualified financial engineers career opportunities in top financial services companies.
Financial markets join the buyers and sellers of financial products or securities. Financial products and securities are tradeable units of capital or wealth and the main focus of a financial engineer. He or she could be involved in buying and selling capital in person such as at the New York Stock Exchange (NYSE), or online such as through the National Association of Securities Dealers Automated Quotation (NASDAQ) or through other over-the-counter (OTC) markets.
The main career duties of someone in this position are to create wealth by trading the company's capital, create new financial products, conduct risk management and measurement, and manage investment portfolios. Financial engineering is the mathematical science of the laws of financial products and securities. A solid understanding of both applied mathematics and investment models is absolutely necessary for a financial engineer.
The Black and Scholes Option Pricing Model is a common investment model run by a financial engineer and is a crucial part of modern financial theory. Fisher Black, Robert Merton, and Myron Scholes created the model in 1973 as a method of calculating fair prices for options such as a European call option. A European call option is a contract in which the buyer of the option can choose to buy, or not buy a financial product at the agreed on amount and price.
Career opportunities in computational finance require a strong working knowledge of quantitative finance and the ability to work with applied research. Career opportunities for a financial engineer in research are often available as real life anomalies contradict research and limitations in computational data continue to exist. Those seeking to work in capital markets may find a career as an in-house or outside investment consultant or portfolio manager. All types of investors usually require services that help manage their 401Ks.
A financial engineer seeking to work in the field of financial technology may find career opportunities in information technology (IT) as a web designer, network engineer, software engineer, or applications developer. Working with high performance databases in operational risk management and measurement is often part of a career in financial technology. Clearing and settling financial transactions is also often a part of a financial technology career.