<p>What exactly is financial engineering and does it differ from operations research? </p>
<p>Compared to a major such as OR or Business, what kind of prospects does it offer? </p>
<p>What kind of jobs would a person with an engineering undergrad masters in financial engineering get?</p>
<p>I know this should probably be in a business form but, if anyone could help distinguish between FE and OR, that would be nice.</p>
<p>Thanks.</p>
<p>Mainly used within the corporate, banking, insurance, financial services and manufacturing sectors to manage risk and structure investment strategies.</p>
<p>These are the kinds of firms you can expect to work for. </p>
<p>• Energy Firms
• Financial Data and Software, Research and Consulting Firms
o Financial Data and Information
o Financial Software - Major Companies
o Financial Software - Others
o Financial Research
o Financial Research and Consulting
• Investment Firms and Banks
o Leading Investment Firms and Banks
o Other Leading Investment Firms and Banks
• Management Firms and Consultants, Money Managers and Pension Fund Managers
o Consulting Firms
o Leading Money Managers
o Other Leading Money Managers
o Leading Pension Fund Managers
• Insurance Companies
• Exchanges
• Financial ECNs
• Federal Agencies </p>
<p>I don’t know about the job opportunities for undergraduate positions since it’s kind of a niche market; if it’s a masters then it wouldn’t be undergrad. Maybe in the future undergrad programs will be more prevalent and recruited since the actual technicalities aren’t too far beyond undergraduate comprehension. You can look into schools with undergrad programs and check their job placement history.</p>
<p>60% of the work is programming and it’s like any other form of engineering, things change really quickly and youth is important especially in IB which is probably the largest employer. </p>
<p>Georgia</a> Institute of Technology :: Quantitative and Computational Finance - Home</p>
<p>Thanks for the reply. I meant an engineering undergrad and a masters in FE, sorry.</p>
<p>I think a Masters in FE will allow you be hired as a consultant or associate for consulting firms, investment banks, brokerages and possibly private equity or hedge funds, though those are probably rarities.</p>
<p>Most likely, you will be doing quantitative work meaning models, trade projections and programming.</p>
<p>Financial Engineering is OR applied to the financial arena. You apply some rather well-accepted statistical techniques to balance risk and returns, to manage investment portfolios, and to execute optimization processes based on differential equations. Engineering training is quite useful, as much of the math is the same. Like much engineering, FE is weaker in the statistics arena, including an over-use of the assumption of normality. In OR we try to avoid this pitfall.</p>
<p>OR applies to a wide range of fields: traffic planning, resource allocation, plant management, military planning, modeling and simulation (for decisions or for training), data mining, economics, and many more.</p>
<p>Lacero listed the many job fields available to FEs. You could call yourself an FE after getting a masters in systems engineering or OR with a specialization in FE or finance. There are also MBA programs that get you the same place. </p>
<p>Beware, however, this is field that is very sensitive to market conditions. Many IBs have been laid off in the past few months. </p>
<p>I should point out, there are heretics like me who believe the 'financial engineering' emperor has no clothes. All this modern portfolio theory rests on a broad range of assumptions that the data do not support. Price changes, for example, are not normally distributed. They are heavy-tailed. There have been single-day price changes in the Dow that represent 22 sigma. The odds of that (for a normal distribution) are on in 10 ^ 50. It's a number so small that it has no meaning.</p>
<p>The implication is that all the FEs are underestimating risk by many orders of magnitude.</p>
<p>Redbeard, you seem to know alot about OR and Industrial Engineering in general. Do you know of any advancements or important research topics that are going on in the field? My one conception about OR is that there isn't tons of new things going on in the field ( i could be mistaken). I guess this also applies to FE. Am I wrong to assume this?</p>
<p>Thanks for the informative reply Redbeard.</p>
<p>I second scs's question... are there new things happening in OR? Also, for a person who doesn't want to go into wall street, are there ample opportunities to pursue other options as an OR? Most of the ORs from my school go into banking; I like OR but I'm not sure I would like banking.</p>
<p>I'll throw another question Redbeard's way. Is OR generally a master's or higher degree, or could one enter the field with a bachelor's in something like Industrial and Systems Engineering? Just wondering because I have interest in OR, but financially it would be a poor decision for me to pursue my master's right after undergrad at this point. And also, straight to the point: how high do the salaries get in the OR field, what do they start at, and how quickly can you move up? I don't care about being insanely rich but I'd like to make 6 figures. </p>
<p>Thanks for your knowledge.</p>
<p>I think you can work for courier companies.. which sounds fun (at least to me it sounds fun.. making sure packages reach their destinations on time.. heck this reminds me of the college appl process..)</p>
<p>you can look for the graduate destinations of people who graduate in OR.. I've seen a Cornell ORIE list.</p>
<p>OR will always have unique opportunities. One example is UAV control systems (unmanned aero vehicles). Suppose you have 10 UAVs and 35 places to take pictures...what is the best team assignment? What happens if some requests are higher priority than others? Alot of the work in that problem is optimization and scheduling, OR style. </p>
<p>I think there will be more and more of this work as technology improves; almost complete automation, requiring minimal human input.</p>
<p>Sorry it took me a while to get back to your questions. Summer vacation with the family and all...</p>
<p>New topics in OR: There are several broad fields of new work. One is in the area of 'computational' science. This means, normally, simulations of systems or processes that are too complex for a mathematical, closed-form solution. There is computational statistics -- the determination of underlying stats using a simulation. There is computational social science, which uses agent-based models and simulations to evaluate system performance and behavior when the interactions between individual elements is important to overall changes in state. OR can be part of an analysis of social network theory, which helps in marketing, technology development, land use, or, in the military domain, counterinsurgency. </p>
<p>Moving toward more traditional techniques applied innovatively, there is a lot being done to help understand supply chain and logistic decisions. OR helps model risk and describe, for the decision-maker, the impact of various courses of action. </p>
<p>There are a lot of research processes that use OR to operate more efficiently. OR methods can help design experiments so that the best conclusions can be reached with the least amount of research or the fewest trials. </p>
<p>Large organizations such as the military often use OR experts for long-term force structure decisions. And, manpower planning is an important process that needs people to do quantitative analysis. OR experts often participate and sometimes lead organizational reform efforts within the company. </p>
<p>The optimization tools can be used by financial decision makers and senior executives for 'balance of investment' or 'portfolio management' decisions. This is not always choosing the right stocks to buy. It can be a decision by a manufacturer to open or close a particular line of business. </p>
<p>While this might be the province of business managers or MBAs, I've seen such people fail completely due to a lack of quantitative and statistical firepower. Often, the MBA might be the consultant, but the real work is done by an OR practitioner or a statistician behind the scenes.</p>
<p>Check out the jobs available on the OR/MS website: Operations</a> Research Management Science Employment Classifieds</p>
<p>I hope that helps!</p>
<p>gatorjacket, most of the folks we hire have masters degrees. Some on our staff have only undergraduate training (sometimes with continuing education), and they contribute. But, they have told me that themselves that the discussions often go beyond their body of knowledge. To be a true practitioner in this field, plan on having an MS, OR before you're 30. </p>
<p>If money is a problem, most companies pay for people to get their MS part time. (I got mine part time on the GI bill, but my classes were filled with people who were funded by their employers.) Actually, now that I think of it, my son (Systems engineering class of '07) is doing a masters right now on his company nickel. </p>
<p>Salaries seem to be quite generous in this field. I think there is a supply/demand imbalance in our favor. For whatever reason, if you plug 'operations research' into salary.com, you will be pleasantly surprised. Six figures is not unusual, either on that site or in my experience. </p>
<p>After about ten years in the field you would qualify for a government job in the YD-3 level. That pay band starts (in Washington, DC) at 95K and goes up to 156K. Private industry gets paid comparably.</p>