Financial Engineering The Evolution of a

The purpose of this book is to provide a comprehensive view of financial engineering by describing the current state of financial research and practices, including timeless techniques. There will be a focus on the future of financial engineering and a discussion of several techniques that were created to exploit specific opportunities as they developed. The book is intended for senior managers, board members, regulators, finance professionals, as well as advanced undergraduate and graduate students. The book is separated into four parts. The first part maps out a timeline of financial engineering, detailing the history of this topic and its different players, developments and products. The second parts details each market, from fixed income, equity and derivatives to foreign exchange and securitized and structured products, and discusses how financial engineering has played a role in each. The third part is a series of case studies in financial engineering, including a look at the subprime crisis and how financial engineering tools and techniques were used there. Finally, the fourth section discusses the future of financial engineering where the authors ask: Where do we go from here?

Tanya S. Beder is Chairman of SBCC in New York. She has clients around the world and is a featured speaker in the areas of risk management, structured securities, strategy, governance and financial forensics. Beder is on the Board of Directors of American Century Mutual Funds, the National Board of Mathematics and Their Applications and is an Appointed Fellow of the International Center for Finance at Yale University. Previously, she was CEO of Tribeca, a $3 billion multi-strategy hedge fund and Managing Director of Caxton, a $10 billion investment firm. Beder is widely published, including in The Journal of Portfolio Management, Financial Analysts Journal, and Harvard Business Review. Her degrees are from Harvard and Yale Universities.

Cara M. Marshall is a professor of finance and risk management at Queens College of the City University of New York and consults to the financial services community as a training consultant. She has been published in the Global Finance Journal and contributed to Financial Derivatives: Pricing and Risk Management (also published by Wiley).

Introduction	p. xi
Overview	p. 1
The History of Financial Engineering from Inception to Today	p. 3
Careers in Financial Engineering	p. 29
A Profile of Programs and Curricula with a Financial Engineering Component	p. 51
Financial Engineering and the Evolution of Major Markets	p. 71
The Fixed Income Market	p. 73
The U.S. Mortgage Market	p. 111
The Equity Market	p. 131
The Foreign Exchange Market	p. 159
The Commodity Market	p. 191
The Credit Market	p. 215
Key Applications of Financial Engineering	p. 241
Securitized Products	p. 243
Structured Products	p. 259
Thoughts on Retooling Risk Management	p. 273
Financial Engineering and Macroeconomic Innovation	p. 289
Independent Valuation for Financially-Engineered Products	p. 305
Quantitative Trading in Equities	p. 323
Systematic Trading in Foreign Exchange	p. 337
Case Studies in Financial Engineering: The Good, the Bad, and the Ugly	p. 367
Case Studies Introduction	p. 369
Mortgage Case Studies: Countrywide and Northern Rock: Algorithmics Software LLC	p. 373
Derivatives Case Studies: SocGen, Barings, and Allied Irish/Allfirst: Algorithmics Software LLC	p. 385
Fixed Income Case Study, Swap Market: The Allstate Corporation: Algorithmics Software LLC	p. 405
Lessons from Funds: LTCM, Florida, and Orange County: Algorithmics Software LLC	p. 409
Credit Derivatives Case Studies: AIG and Merrill Lynch Algorithmics Software LLC	p. 421
Special Topics in Financial Engineering	p. 431
Performance Fees	p. 433
Musings About Hedging	p. 445
Operational Risk	p. 455
Legal Risk	p. 465
Portable Alpha	p. 487
The No-Arbitrage Condition in Financial Engineering: Its Use and Misuse	p. 497
Influencing Financial Innovation: The Management of Systemic Risks and the Role of the Public Sector	p. 521
Appendices	p. 547
IT Tools for Financial Asset Management and Engineering	p. 549
About the Companion Website	p. 569
About the Editors	p. 575
Index	p. 577
Table of Contents provided by Ingram. All Rights Reserved.

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Financial Engineering The Evolution of a Profession

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