Almost all financial engineering programs require certain math pre-requisites to be completed before students are officially accepted. Here are the most common courses that aspiring financial engineers should consider taking.
Math Basics
Students should take as many calculus classes as possible. This includes basic calculus skills related to derivatives, algebraic function differentiation and maxima and minima functions. Students should be familiar with integral calculus and associated integration applications. They should have knowledge of intermediate calculus, such as logarithmic and trigonometric functions, as well as advanced calculus concepts, such as cylindrical coordinates, vector fields and multivariate minimization.
It is also recommended to know advanced linear algebra concepts, like eigenvalues and eigenvectors, and differential equation principles, such as linear, numerical and qualitative analysis. Finally, students should be familiar with the basic principles of computer programming.
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Theoretical Basics
Most degree programs require students to have completed the following business-based courses. First, financial accounting classes provide the foundation for the creation and interpretation of financial statements. Students learn about accrued liabilities, credit risk ratios and asset valuation. Second, economics classes explore the relationships between money, engineering and financial systems. These classes should concentrate on things like production costs and financial economics.
Courses on quantitative methods will train students on financial modeling, probability theories and Markov and Poisson processes. Third, corporate finance courses introduces students to topics like the valuation methods and the mechanism of financial markets. Fourth, most programs require students to study financial risk management, which exposes them to things like risk models, asset pricing and measurement principles.
Mathematical Electives
Although not required, prospective financial engineer students will benefit from taking elective mathematics classes. They should confirm if these electives may be applied to their specific degree program. For example, classes on term structure models will teach students about standard interest rate models and numerical techniques used for pricing interest rates and securities.
Studying financial big data will prepare students to understand data analytics so they will understand the complex mathematical models used to maximize returns and thus make better investment decisions. Note that some programs require students to successfully obtain the industry standard Bloomberg certification before graduation.
Degree Tracks
Financial engineer students are free to choose from standard degree concentrations. For those interested in financial economics, they should study behavioral finances, corporate economics and advanced corporate finance. Students who want to specialize in derivatives should study quantitative finance, applications programming and credit and computational derivative modeling. Future asset managers are advised to take classes on foreign exchange, algorithmic trading and asset allocation.
Technically talented students may take computation and programming coursework related to risk and financial data information systems. Finally, those who want to study computational finance or trading systems are advised to take classes on experimental finance and derivatives pricing. Studying financial crises and systems will prepare students to properly respond to and manage financial risks.
Students are advised to consult with their target financial engineering program to ascertain the specific math pre-requisite courses.
Additional Resource: Top 10 Most Affordable Online Master of Finance Degree Programs 2015
