Thinking About a Master’s in Financial Engineering? Read This First.

According to the Encyclopedia Britannica, finance is “the process of channeling… funds in the form of credit, loans, or invested capital to those economic entities that most need them or can put them to the most productive use.” The instruments for securing and delivering these funds were once relatively simple—loans, stocks, bonds—but have grown increasingly complex with advances in financial theory. The advent of supercomputing and, with it, Big Data has created further opportunities for financial instruments and financial strategies that were previously unimaginable, but these opportunities are difficult to understand without a great deal of technical, mathematical, and business expertise. Proficient in computer science, advanced mathematics, and finance, financial engineers hold the skills necessary to make sense of today’s complex financial world.

Financial engineers typically work at investment banks, hedge funds, corporate treasuries, stock brokerages, insurance companies, commercial banks, actuarial firms, and regulatory agencies. They applying their computing skills, mathematical prowess, and business training to help plan and execute financial strategy. Their roles include managing financial risk, configuring portfolios, creating automated systems for trading, managing foreign exchange funds, developing investment plans, and trading derivatives.

A career in financial engineering can be fulfilling and lucrative, but it requires a significant amount of specialized training. Where best to receive that training? Some schools offer MBAs with a financial engineering concentration; others offer a master’s in finance with a financial engineering track; still others offer certificate programs.

Short of a PhD, however, the most in-depth option is the Master of Science in Financial Engineering (MSFE), a multidisciplinary degree typically taught by a university’s faculties in business, computer science, and mathematics. In an MSFE program, you will study economics, pricing and hedging, quantitative methods, probability, stochastic processes, financial risk management, portfolio theory, and computer programming. Quant skills are essential to succeed, as is computer programming acumen. MSFE programs are accredited by the International Association of Quantitative Finance (IAQF).

__(But first! Who Should Get a Master’s in Financial Engineering?)__

How do you select the financial engineering master’s program that’s right for you? Fortunately, there’s help. The IAQF lists all academic programs in financial engineering (although you may find its list is not always 100 percent up-to-date, it is still a worthwhile resource). Their site includes a handy tool that allows you to compare up to five programs at a time. Also, QuantNet.com ranks the top 30+ financial engineering programs annually. These two resources, plus our article on the few online financial engineering master’s programs, should help you in your research. IAQF recommends the following criteria for evaluating MSFE programs: curriculum; practical vs. theoretical training; faculty; resources and facilities; and placement results.

Curriculum

The IAQF reports that there are no national or international standards for what constitutes a sufficient financial engineering curriculum. Even so, nearly all programs build off a basis of advanced mathematics, computing, and finance that includes study in economics, programming, pricing, investment, derivatives, stochastic calculus, linear algebra, differential equations, and probability theory. Beyond these basics, programs vary in the number of electives offered and in their graduation requirements’ distribution of core and elective courses. Some offer options to concentrate in a specialized field, others do not. Some programs are project-based, others focus on case studies, and others still utilize the tried-and-true lecture-and-exam approach. Know what you want from a financial engineering program, reach out to admissions counselors at each program, and ask until you’re satisfied that the school’s approach fits your interests and your style of learning.

Practical vs. theoretical training

Financial engineering programs range from those that are highly theoretical to those that are practically boot camps for financial engineering processes. Are you more interested in the underlying principles and theories that drive financial engineering and which could lead to the next developments in the field, or do you want to get your hands dirty with as many case studies and practical examples as possible? Or are you looking for a program that strikes a happy balance between the two? Read each school’s website, parse its curriculum to determine the program’s focus, ask an admissions counselor, and review the career placement data on the program’s website. Highly theoretical programs will have more academic placements than do practical programs.

Faculty

Review the faculty members’ online biographies. They will tout all the instructor’s published research, and that’s great, but they may not be so informative on two other key questions: how active does the faculty member remain in the community of financial engineering practitioners, and how well does the faculty member teach? You’ll probably have to do some digging to answer these questions. Google faculty members to search for evidence of current activity as a consultant or analyst. Sites like Reddit and Quora are good sources of student comments on faculty members’ teaching styles. Sites like RateMyProfessors.com skew heavily toward feedback from undergraduates, and are generally less helpful.

Resources and facilities

What sort of resources does each program offer to support instruction? Consider Stevens Institute of Technology, whose Hanlon Financial Systems Center matches much of the software and high-power hardware utilized by the big investment banks just across the Hudson River. Resources like this obviously have the capacity to enhance learning by putting the actual tools of your trade in your hands; they also indicate a sizeable commitment by the university to the programs using the resources. You can learn without them, but they are definite value enhancers.

Placement results

Nearly every MFSE program posts the placement data for previous graduating classes online. Look them over carefully, not just for placements rate and median, high, and low salaries, but also to see where students in the program wind up working. These lists will include employers who actively recruit from the program and employers who simply favor graduates of the particular program or university, and this information will give you a good sense of where you might wind up post-degree. Note that different programs tend to place graduates more frequently in certain industries and sectors, and keep that in mind as you choose your program. Many programs include internships; check their lists of internship placements as well, as this is another indicator of a close relationship between the program and an employer.

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