Friday, November 11, 2011

Research areas in Financial Engineering and Trends

Introduction: This blog is aimed to deliver you the latest research and innovation in financial and risk engineering. I will be posting topics related to Energy risk, financial game theory, financial war simulations, modeling developments on derivatives, and other areas of finance. Also I will try to link these areas to the studies for CFA/FRM and other courses.

Game theory is to predict how a game would look like and what can be the moves. It identifies the game into a type link the probabilities and then find the best path to move so that ultimately the result is the best.

Portfolio is defined by the modern portfolio theory also covered in the exams, but in real we need to adjust various parameters. For example in real the risk may not be just SD, distributions needs to tweaked, time lines needs to adjusted and selection of right tiem interval, etc. There are also various software available for the same and there are lots of complexities which needs to be modeled.

Option pricing is another very very quant based areas which use physics from quantum mechanics. All those who like physics will like this area of derivative pricing.

Energy risk with focus on  Investment banking for alternative energy sources like solar, wind and fuel cell is any area that will play a very important role. The current energy companies needs to make a very right strategy so that they can create wealth.

Financial Engineering includes Java/C++ modeling and advanced Engineering maths which has calculus, vector, advanced probability which is one step up from the the CFA prep. With CFA and FRM in your resume you must look into this area, as in real life these kinds of models are seen.

Some of the Journals that I am referring are:
Review of Quantitative Finance and Accounting @ Springer

Mathematical Finance @ Wiley
Quantitative Finance @ Taylor & Francis
Applied Mathematical Finance  @ Taylor & Francis
Journal of Empirical Finance  @ ScienceDirect

I will post some of the review about the recent developments in Quantitative Finance in the Blog in the coming days.

Application of what we have in CFA1/2 FRM 1/2 SAS/Matlab can be seen very clearly in international business and green energy business models. Economics of CFA L2 is quite interesting and talks about important international economics. Whereas international strategy for international business is very much dependent of aspects of foreign exchange, and investment accounting taxing etc.

I will be looking for how game theory can be imbibed in the financial studies I am doing especially when it comes to areas like Nanotechnology. This becomes even more important when you are aware of all areas of CFA and FRM and then move to research and I can see that benefit.

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