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More About This Title Financial Engineering: The Evolution of a Profession + Companion Website
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FINANCIAL ENGINEERING
The Robert W. Kolb Series in Finance is an unparalleled source of information dedicated to the most important issues in modern finance. Each book focuses on a specific topic in the field of finance and contains contributed chapters from both respected academics and experienced financial professionals. As part of the Robert W. Kolb Series in Finance, Financial Engineering aims to provide a comprehensive understanding of this important discipline by examining its fundamentals, the newest financial products, and disseminating cutting-edge research.
A contributed volume of distinguished practitioners and academics, Financial Engineering details the different participants, developments, and products of various markets—from fixed income, equity, and derivatives to foreign exchange. Also included within these pages are comprehensive case studies that reveal the various issues associated with financial engineering. Through them, you'll gain instant insights from the stories of Countrywide (mortgages), Société Générale and Barings (derivatives), the Allstate Corporation (fixed income), AIG, and many others. There is also a companion website with details from the editors' survey of financial engineering programs around the globe, as well as a glossary of key terms from the book.
Financial engineering is an evolving field in constant revision. Success, innovation, and profitability in such a dynamic area require being at the forefront of research as new products and models are introduced and implemented. If you want to enhance your understanding of this discipline, take the time to learn from the experts gathered here.
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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).
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Introduction xi
Tanya Beder and Cara M. Marshall
PART I Overview 1
1 The History of Financial Engineering from Inception to Today 3
Tanya Beder
2 Careers in Financial Engineering 29
Spencer Jones
3 A Profile of Programs and Curricula with a Financial Engineering Component 51
John Cornish
PART II Financial Engineering and the Evolution of Major Markets 71
4 The Fixed Income Market 73
Peruvemba Satish
5 The U.S. Mortgage Market 111
Bruce McNevin
6 The Equity Market 131
Gary L. Gastineau and John F. Marshall
7 The Foreign Exchange Market 159
Laurent L. Jacque
8 The Commodity Market 191
Helen Lu and Cara M. Marshall
9 The Credit Market 215
Frank Iacono
PART III Key Applications of Financial Engineering 241
10 Securitized Products 243
Konstantin Braun
11 Structured Products 259
Timothy A. Day
12 Thoughts on Retooling Risk Management 273
Tanya Beder and Spencer Jones
13 Financial Engineering and Macroeconomic Innovation 289
Cara Marshall and John O’Connell
14 Independent Valuation for Financially-Engineered Products 305
Cindy W. Ma and Andrew MacNamara
15 Quantitative Trading in Equities 323
Kun Gao
16 Systematic Trading in Foreign Exchange 337
Chris Attfield and Mel Mayne
PART IV Case Studies in Financial Engineering: The Good, the Bad, and the Ugly 367
17 Case Studies Introduction 369
Penny Cagan
18 Mortgage Case Studies: Countrywide and Northern Rock 373
Algorithmics Software LLC
19 Derivatives Case Studies: SocGen, Barings, and Allied Irish/Allfirst 385
Algorithmics Software LLC
20 Fixed Income Case Study, Swap Market: The Allstate Corporation 405
Algorithmics Software LLC
21 Lessons from Funds: LTCM, Florida, and Orange County 409
Algorithmics Software LLC
22 Credit Derivatives Case Studies: AIG and 421
Merrill Lynch
Algorithmics Software LLC
PART V Special Topics in Financial Engineering 431
23 Performance Fees 433
Mark P. Kritzman
24 Musings About Hedging 445
Ira Kawaller
25 Operational Risk 455
Monique Miller
26 Legal Risk 465
Jordana Krohley
27 Portable Alpha 487
Tanya Beder and Giovanni Beliossi
28 The No-Arbitrage Condition in Financial Engineering: Its Use and Misuse 497
Andrew Aziz
29 Influencing Financial Innovation: The Management of Systemic Risks and the Role of the Public Sector 521
Todd Groome, John Kiff, and Paul Mills
PART VI Appendices 547
A IT Tools for Financial Asset Management and Engineering 549
B About the Companion Website 569
About the Editors 575
Index 577
