Financial Engineering

DEFINITION of 'Financial Engineering'

The use of mathematical techniques to solve financial problems. Financial engineering uses tools and knowledge from the fields of computer science, statistics, economics and applied mathematics to address current financial issues as well as to devise new and innovative financial products. Financial engineering is sometimes referred to as quantitative analysis and is used by regular commercial banks, investment banks, insurance agencies and hedge funds.

BREAKING DOWN 'Financial Engineering'

Financial engineering has led to the explosion of derivative trading that we see today. Since the Chicago Board Options Exchange was formed in 1973 and two of the first financial engineers, Fischer Black and Myron Scholes, published their option pricing model, trading in options and other derivatives has grown dramatically.

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RELATED FAQS
  1. What is continuously compounding interest?

    An interest contract with continuously compounding interest is designed to maximize the total possible interest accumulation ... Read Full Answer >>
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  3. What is after-hours trading? Am I able to trade at this time?

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