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Financial Engineering

Financial engineering is the multi disciplinal area which is based on the mathematical finance, computational intelligence, computer simulations for doing trading, numerical methods hedging and investment decisions, as well as helping the risk management of those determinations. Applying several methods, practicing of computational finance target to just distinguish the financial risk that defined financial instruments produce. It is also referred as Computational finance.

Financial engineering is employed in the conception of new financial instruments and schemes, by and large alien alternatives and differentiated interest rate derivatives. The area enforces engineering methodological analysis to issues in finance and utilizes financial theory and applied mathematics, as well as computation and the pattern of programing.

Financial engineering is also employed in the procedure of producing securities,  planning new financial instruments and new processes, in particular derivative securities. Methods could be employed to accept on straight-out risks under defined events or altogether annihilate other risks by utilizing combinings of derivative and some other securities.

Financial engineering could be applied to  various forms of pricing and currencies alternatives. It comprise fixed income such as bonds, equity,  commodities such as gold and oil, along  with  swaps, forwards, derivatives, embedded alternatives and  futures alternatives. Risks are into   market risk and credit risk.  Market risks could be dealt employing risk measurements,  risk management and  risk identification. Credit risks can be dealt employing credit modeling and  credit pricing.

Financial engineering is by and large employed in securities  and banking industries. It is also employed by quantifiable business analysts in consulting business  firms or in general manufacturing firms, service, risk management, corporate treasury roles and  corporate finance.

Arenas where financial engineering techniques are employed comprise:

ñ Corporate strategic planning

ñ Investment banking

ñ Forecasting

ñ Insurance policy

ñ Risk Management software

ñ Investment management

ñ Securities trading and financial risk management

ñ Derivatives trading and risk management

ñ Mortgage agreement

ñ Pension

ñ Lottery design

ñ Islamic banking

ñ Currency peg

ñ Gold and commodity valuation

ñ Collateralize debt obligation

ñ Credit default swap

ñ Bargaining

ñ Market mechanism design

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