Meaning and scope of financial engineeringFinancial engineering

is the process of employing mathematical finance and computer modeling skills to make pricing,hedging, trading and portfolio management decisions. Utilizing various derivative securities and other methods, financialengineering aims to precisely control the financial risk that an entity takes on. Methods can be employed to take onunlimited risks under certain events, or completely eliminate other risks by utilizing combinations of derivative and othersecurities.

Areas where financial engineering techniques are employed include:

Investment banking

Corporate strategic planning

Risk management

Primary and derivative securities valuation

Swaps & derivatives trading or dealing

Financial information systems management

Portfolio management

Securities trading

TOOLS OF FINANCIAL ENGINEERING

FACTORS CONTRIBUTING TO THE GROWTH OF FINANCIAL ENGINEERING.

Price Volatility Globalisation of Market Tax Asymmetry

Regulatory Changes Liquidity Needs Accounting Benefits Financial Engineering

Financial Engineering is a multidisciplinary field that include finance, computer science, methods of engineering, mathematics, statistics and actually is the focus of variety kinds of research. The complexity of the business as well as the financial market and all markets interaction demands today more diverse and accurate financial tools. Financial Engineering can consider any business and can look at all the process, translating on financial equation all the operational system. Many markets participants, even non financial firms, would greatly benefit from financial engineering tools and capital markets if they can understand financial products that are available. Firms want to capitalize through the market. Entrepreneurs need to evaluate their business viability and cash flow estimation. Investors want revenues-risk projections before decisions. Growers need to understand and theirs market risks metrics (from commodities or exchange rates fluctuation or climate changes) and protect themselves from future uncertain. Speculators want to get information about markets dynamics to profit on prices changes. Banks need to know risk metrics (volatility, credit risk) of diverse assets exposures, to provide financial services. Public and Private Institutions need to manage their assets and liabilities. Many Institutions decide to interact directly with the capital market and, differently from others software-based industries, the interaction with the market have particularities. Some of this technologies is controversial because of the danger of a bad projected software can cause. Quality procedures, such design-prototype-develop-track, software engineering process, simulation, sensitivity analysis, robust optimization can address the technological risk as well other financial risks.