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Online Course on Financial Engineering & Risk Management

Columbia University is starting a free online course “Financial Engineering and Risk Management Part I” in collaboration with Coursera. This course provides an introduction to various classes of derivative securities and we will learn how to price them using “risk-neutral pricing”.

Financial Engineering is a multidisciplinary field involving finance and economics, mathematics, statistics, engineering and computational methods.

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The course will help to learn the use of simple stochastic models to price derivative securities in various asset classes including equities, fixed income, credit and mortgage-backed securities. The most important feature of this course will be an interview module with Emanuel Derman, the renowned “quant” and best-selling author of “My Life as a Quant”.

This course FE & RM Part I will also have the follow-up course FE & RMPart II, which will help students to have a good understanding of the “rocket science” behind financial engineering. In this course students will also understand the limitations of this theory in practical form and why financial models should always be treated with a healthy degree of scepticism.

Duration of the course
This course will start from 28th October 2013 for the duration of 7 weeks. Candidates have to spend 7-10 hours/week on this course.

Students are recommended to have advance knowledge of probability and statistics, linear algebra and calculus.All required “programming” questions will be completed within Excel. However students are welcome to use whatever software / languages they prefer in order to complete the assignments.

Course Syllabus
The following topics will be covered during this course:
-Introduction to forwards, futures and swaps
-Introduction to options and the 1-period binomial model
-The multi-period binomial model and risk-neutral pricing
-Term structure models and pricing fixed income derivative securities
-Introduction to credit derivatives
-Introduction to mortgage mathematics and mortgage-backed securities

Course Format
The class will consist of video lectures each video’s duration will be about 10 to 20 minutes. There will also be quiz questions at the end of, most of the lectures. There will be approximately 7 assignments and students will need to complete 1 of them in order to complete the course.

Suggested Readings
For the deep understanding about the course students may take reference from the book Investment Science, by David G. Luenberger from Oxford University Press, 2013.

Statement of Accomplishment
Students after successfully completing the course will receive a statement of accomplishment signed by the instructors.

About the Instructor
Professor Martin Haugh is co-Director of the Centre for Financial Engineering at Columbia University. He worked in the hedge fund industry in both New York and London, specializing in equity and credit derivatives. He holds a PhD in Operations Research from MIT.

Professor Garud Iyengar is teaching courses of asset allocation, asset pricing, simulation and optimization at Columbia University’s Industrial Engineering and Operations Research Department. He received a PhD in Electrical Engineering from Stanford University.