What do financial engineers do

Financial Engineering Career Guide: Program, Jobs, Salary

Financial engineering career guide

Financial engineering is an area that needs someone who can do everything. The core discipline would be funded. However, to solve the problems in finance, this guy needs to look to other disciplines such as applied mathematics, computer science, statistics, and economic theory. If this sounds interesting and you are one of those people who can think both divergent and convergent, this newly developed field should be your go-to.

Yes, we know there are two things that would preoccupy you before you ever step forward. The first would be - what are the career opportunities in financial engineering! And second - how much can I expect to be paid!

In this article, we're going to address both issues. All you have to do is relax and read through. This is all you need to know about financial engineering career prospects and compensation details. Below is the structure of this article -

Let's get in. Before we dive into career prospects, let's take a quick look at the financial engineering profession.

What do financial engineers do?


Financial engineers must have a thorough understanding of financial markets and the volatility of the markets. Based on knowledge of the financial market and financial theories, financial engineers attempt to create simulations and predict possible market behavior. The predictions they make are pretty close to the actual ones most of the time, but sometimes they are not accurate (since there are so many variables and dynamic market forces).

Source: oak foliage

Financial engineers don't just need knowledge of financial markets and theories. Rather, they also require significant competencies in computer programming and applied mathematics. These skills help financial engineers create simulated financial models so that they can most accurately predict market behavior. You also need to know statistics and economic theory to understand the various forces in the market that drive market behavior.

Financial Engineering - Career Roles


Most financial engineers work in various areas of risk management and financial analysis. Let's take a look at the possible areas you can work in when you become a financial engineer.

  • Derivatives pricing
  • Risk management
  • structured products
  • Evaluation of options
  • execution
  • Financial regulation
  • Corporate finance
  • Portfolio management
  • trade

What degrees do financial engineers need to get to be on site?


Financial engineering is an area that is taught in many universities. Let's take a look at what they are and which universities offer these courses.

Source: Moodys

There are numerous courses in financial engineering. We will only select the 10 best courses in the world.

These are the 10 best financial engineering courses in the world, according to quantnet.com -

rankUniversity / programTuition fees (in US $)
1Carnegie Mellon University - Computer Finance80.400
2Columbia University - Financial Engineering61.560
3University of California, Berkeley - Financial Engineering66.082
4Baruch College, University of New York - Financial EngineeringNonresident - 35,040

Population - 24,315

5New York University - Mathematics in Finance58.000
6Princeton University - Masters in Finance90.700
7Columbia University - Financial Mathematics60,332
8Cornell University - MEng, FE Concentration74.000
9Massachusetts Institute of Technology - Master of Finance12 months - 75,850

18 months - 100,350

10University of Chicago - Financial MathematicsWithout C ++ - 66.166

With C ++ - 81.216

Source: quantnet.com 

Skills required to be successful in financial engineering


Basically, there are three skills that you will need most if you are to be successful in a financial engineer.

Source: Fanniemae

Mathematical skills for financial engineering:

Exercising doesn't mean knowing a few key concepts and thinking that you are good to walk. It should be a lifelong affinity. The more you pushed, the better you would be at math. And to be a great financial engineer, you really have to have a fascination with mathematics. You should be able to:

  • Linear algebra and differential equations
  • Numerical Linear Algebra (NLA)
  • Game theory
  • Calculus (differential, integral & stochastics)
  • Probability & Statistics

Financial skills for financial engineering

This would be your core topic, so it goes without saying that you need to build some muscle in financial theories and applied finance. Once the basic fundamentals are clear, you need to go as deep as possible. If you take a course we mentioned above, you will be good at financial theories and financial markets. You should be able to:

    • Financial modeling
    • Portfolio theory
    • accounting
    • Balance sheet analysis
      • Knowledge of credit risk products
      • Equity and Interest Rate Derivatives
      • Fixed Income
      • Monte Carlo techniques

Computer programming skills

Computer programming is a daily requirement in the life of a financial engineer. If not, how would you create simulated financial models? So get more familiar with computer programming. You should be proficient in these programming languages ​​-

  • C ++ (used for high frequency trading applications)
  • python
  • Data mining
  • Java, .NET
  • VBA macros
  • Excel
  • MatLab, SAS
  • Object oriented programing
  • Big data modeling

Aside from the information above, you will also need a basic understanding of economic theory, logic, analytics, and statistics. Another important skill is communication (both oral and written) as you will have to communicate regularly with your teammates and clients and write reports whenever necessary.

Financial engineering salary


Not everyone can become a financial engineer. It takes courage, effort, and determination to be successful. But why try so hard when you have no idea of ​​the end results? Yes, compensation is not the only thing, but without compensation, the other things you are looking for will not bother you.

Let's have an idea of ​​what financial engineers are actually doing.

Let's take a look at what payscale.com mentions about financial engineer salaries.

Source: payscale.com

In determining that average salary (i.e. $ 89,000), two things were most important. The first was an experience in the field and the second is geography. 83% of the respondents are men and the remaining 17% are women in this field. Everyone in financial engineering mentioned higher job satisfaction.

Source: payscale.com

Almost all of the respondents indicated that they received health insurance and dental insurance from their employers.

The most important skill in the financial engineering profession is financial modeling, according to payscale.com.

Source: payscale.com

Now you have an idea of ​​how much compensation you can expect from the financial engineering profession. However, you may feel the need to compare your compensation with related professionals. So here is what payscale.com came up with -

Source: payscale.com

If you consider the average salary of each related profession, you will find that only actuaries, associate investment banking, associate venture capital, and associate director of financial services have average salaries similar or higher than the average salary of a financial engineer. This is good news because as you get more experience, you get better pay and few other professionals could match your expertise and income level.

To better understand the average salary of financial engineers, we also looked at Indeed.com reports. Let's take a look at the analysis actually.com did on the financial engineering salary.

Source: Indeed.com

According to Indeed.com, the average salary for financial engineers is slightly higher than payscale.com's recommendation. To be precise, the median wage is $ 8,000 higher per year, according to Indeed.com. Additionally, the Indeed.com report is more timely as it mentions the average salary of financial engineers as of August 1, 2016.

Indeed.com also identified the latest trends in financial engineering compensation. Let's take a look at the trend, then try to analyze the trend and see whether or not this is good news for budding financial engineers.

Source: Indeed.com

This trend speaks of three years of steady up and down in the compensation of financial engineers. If you look closely, you will find that the compensation goes up from July 2012 to January 2013. As of January 2013, the remuneration is to be pulled down. This downward trend remained constant in February 2013 and March 2013. From April 2013 there is another upward trend. But that didn't take long. The upward trend lasted until May 2013 and then gradually declined in June 2013. There was a drastic downward trend in July 2013, which remained constant until September 2013. From September 2013 the compensation curve began to climb and reached an all-time high in January 2014 and from then on there has been no increase or decrease in the compensation curve. Since this is a two year old report it would be difficult to draw any conclusions from it. But one thing that can worry potential financial engineers is the saturation of compensation. It can be clearly seen that there is saturation between January 2014 and May 2014.

So you need to pay extra attention to your skills because if the saturation continues in 2016-17, you will need to have the expertise and skills to stand out from the crowd.

As a financial engineer, how could you get higher salaries?


No, there is no shortcut to success. But there can be paths that successful people have followed, that you can emulate, and become successful. There is also a path to greatness in a career as a financial engineer. Here is how.

According to Business Insider, if you want to make a name for yourself in financial engineering, here's what you should do:

  • Find out about internship opportunities in renowned companies and give everything you can to learn the trade during your three-month stay at the company.
  • Include your annual salary (expected) when you go for an interview, more than the annual salary you received during your internship.

The first point is self-explanatory. But the second needs an explanation.

According to Business Insider, more than 65 graduates completed internships in well-known companies in 2011. Her monthly salary was $ 7,839. They were paid monthly and they were only paid for 3 months. But instead of giving the monthly salary, if we took the annual salary based on the monthly salary they received, it would be $ 94,068 per year.

When we analyzed the Indeed.com and Payscale.com survey, we found that the average annual salaries of financial engineers were $ 97,000 and $ 89,000, respectively. We must take into account that the average salaries reported by Indeed.com and Payscale.com are the result of experience and skill.

If you are leaving the Financial Engineering / Master of Finance program and want to continue your career as a financial engineer, it is better to look for internship opportunities in most of the reputable organizations. If you can crack the code, you can provide the expected annual salary based on the scholarship you would receive from your internship opportunity. And, according to Business Insider, it's a lot more than an inexperienced graduate can expect.

In addition, you can enjoy multiple internship opportunities while making sure you learn the skills you need and receive your expected scholarship.

Multiple internship opportunities have four major advantages -

  • First, multiple internships add a couple or triple familiar brand names to your resume, which is always good if you're looking for a lucrative opportunity.
  • You can be accepted into the reputable companies at the end of your tenure if you prove to be a great asset to the company.
  • Even if you cannot be accepted into the reputable company where you would be doing your internship, you can always provide the annual salary for your future employment opportunities.
  • Finally, perhaps most important of all, you would learn a lot about trading with these reputable companies.

So watch out for internship opportunities and use this great strategy to improve your compensation.

Conclusion


Financial engineering is a dynamic field in which you always need to be updated. And since you need to think both ways (inside out and outside in), the information acts as a catalyst for your success.

The more you know, the better your chances of applying and thus the better compensation you can get from the companies you work for. Just don't miss any opportunity for constant study, especially in finance, math, and computer programming, and you're good to go.