Master of Financial Engineering Program

Course Descriptions

Spring (8 weeks)

Fundamentals of Financial Economics

MFE 230A (2 units)
Covers the basic theories of asset pricing, from standard discounted cash flow analysis to No Arbitrage Pricing technique for security valuation. Applications include fixed-income securities, derivatives, and contingent claims.

Empirical Methods in Finance

MFE 230E (3 units)
Covers the probability and statistical techniques commonly used in quantitative finance. Students use estimation application software in exercises to estimate volatility, correlations, and stability.

Introduction to Stochastic Calculus

MFE 230Q (2 units)
Presents the concepts and tools of stochastic calculus as required for effective pricing of complex financial derivatives in continuous time, and introduces the fundamentals of elementary numerical analysis. The course stresses the practical applications of stochastic differential equations, Ito integrals, and measure transformations as required for advanced financial engineering practice and understanding of asset pricing theory.

Financial Institutions Seminar I

Practice Seminars I and II. Feature guest speakers from financial services firms discussing the work of financial engineers in their firms and the kinds of skills and personal attributes they are seeking for this work, trends in the provision of financial services, the information and computing systems being adopted, new product developments, regulatory issues, and similar topics.

Summer (8 weeks)

Derivatives: Economic Concepts

MFE 230C (2 units)
Introduces the use and pricing of derivatives. Topics include basic features of futures and options, binomial and trinomial option pricing, the Black-Scholes formula, volatility measurement, dynamic trading strategies, and exotic options. Course emphasis is economic intuition rather than detailed quantitative analysis, with techniques and arguments developed using the simplest possible mathematics.

Derivatives: Quantitative Methods

MFE 230D (2 units)
Emphasizes the pricing of derivatives in continuous time, from the formulation of the pricing problem to the implementation of computational and numerical solution techniques.

Fixed Income Markets

MFE 230I (2 units)
Provides a quantitative approach to fixed income securities and bond portfolio management with a focus on fixed-income security markets, the pricing and uses for portfolio management, and hedging interest rate risk.

Accounting and Taxation of Derivatives

MFE 230W (1 unit)
Helps financial engineers understand the implications of the innovative financial instruments that they construct on firms’ financial statements and tax liability.

Financial Institutions Seminar II

Fall (8 weeks)

Required Course:

Financial Risk Measurement and Management

MFE 230H (2 units)
Examines financial risk measurement and management, including market risk, credit risk, liquidity risk, settlement risk, model risk, volatility risk, and kurtosis risk.

Choose 5 units of electives:

Advanced Computational Finance

MFE 230R (2 units)
Deeper analysis of numerical and computational issues in pricing and calibration, and builds on the techniques learned in Derivatives: Quantitative Methods. Emphasis is on hands-on case projects with heavy use of computational techniques.

Success and Failure in Financial Innovation

MFE 230J (1 unit)
Students participate in a series of case studies including portfolio insurance, long-term capital management, mortgage-backed securitization, exchange traded funds, capital structure arbitrage, and corporate enterprise-wide risk control.

The Design of Securities for Corporate Financing

MFE 230F (1 unit)
Explores the role capital markets play in solving financial objectives of issuers of securities and investors. Case analysis and strategic decision-making are emphasized.

Credit Risk Modeling

MFE 230V (2 units)
Provides exposure to the practical challenges associated with building and testing credit risk models for use by banks and asset managers. Emphasis is placed on model building, model valuation, and interpreting model output.

Equity & Currency Markets

MFE 230G (2 units)
Reviews equity and currency markets with an emphasis on modeling with historical evidence. Volatility, volume, high frequency dynamics, and dealer behavior in currency markets are considered. Practical considerations used in the implementation of various strategies are considered.

Independent Study

MFE293 (1 - 3 units)

Internship Period (12 weeks)

The Internship/Special Topics in Finance project begins in mid October and ends in early January. Students must enroll in MFE230N, the Internship/Special Topics in Finance course for the fall term.

Winter (8 weeks)

Choose 7 units of coursework:

Asset-backed Security Markets

MFE 230M (2 units)
Explores advanced topics in mortgage and other asset-backed securities. Students apply the latest tools in fixed-income analysis and classic economic and financial models to evaluate securitized bond markets.

Dynamic Asset Management

MFE 230K (2 units)
Covers the strategies for achieving various investment objectives for portfolios/ instruments (equity, fixed income, currency, mortgages, non-traded assets) and applications (investment funds, pension funds, insurance companies, bank investment portfolios).

Behavioral Finance

MFE 230S (2 units)
This course covers elements of behavioral decision theory and its implication in financial markets. Focus is on the psychological processes by which people make judgments and decisions, and the heuristics and biases associated with these decisions.

Applied Finance Project (Required)

MFE 230O (1 - 3 units)
This is an applied project exploring an unresolved finance problem that is met in practice and involves the development or use of a quantitative financial technique.