December 4, 2008
Here is an in depth look at financial engineering degrees. I couldn’t agree more with the author’s opinion. As a recent graduate of several business programs I must say that most finance classes teach students about theories that have very little practical implications in deal making or even investing. Click Here To Read About Students Pursuing Financial Engineering Degrees (click continue reading once you reach the article)
Article Introduction (Via Economist’s View)
All over the world, it has become fashionable for Universities and Colleges to offer Masters degree programs in quantitative finance or financial engineering (FE), a code word meaning the solution of the Black-Scholes option pricing differential equation in as many ways as possible. To do so, students are taught to use basic techniques in numerical analysis whenever the equation is either non-linear or does not lend itself to the standard analytical solution. As a precursor to this main task, the program usually includes a course in stochastic calculus during which Ito’s celebrated lemma is discussed, proved and used.
Article Excerpts (Via Economist’s View)
“It is a plain fact that the field of quantitative finance has not made a single fundamental step forward over the past twenty years, not to mention that Black himself, by his own admission, had nothing to do with the equation that now bears his illustrious name.”
“Statistics and numerical analysis have nothing to do with finance per se but are merely tools of financial analysis, just like accounting statements and legal opinions. Finance is quantitative by definition; there is thus no need to add an adolescent adjective to the word. This is like saying aerial flight or wet swimming.”
“ In effect, quantitative finance has entered the scholastic stage whereby numerical techniques are taught completely out of context as if a deal were somehow a differential equation that could be solved for the right solution. In fact, there is no solution to a deal as there is to a differential equation.”
“Every financial professional worth his salt should be numerate at least to the extent necessary to do his or her own deals, and ideally more. If solving a differential equation is what it takes, then so be it. Unfortunately, it rarely if ever does.”
“What is obvious and regrettable is that no effort is ever made to teach numerical analysis as a proper and rigorous discipline. Instead, students literally learn numerical recipes and are no more equipped to handle reality than someone equipped with a driver’s license when their car breaks down.”
Click Here To Read About Students Pursuing Financial Engineering Degrees
