Certificate Financial Engineering and Risk Management Part II

Financial Engineering and Risk Management Part II
Columbia University

I am thrilled to complete this wonderful course. Assuming you have fully comprehended the content in its preceding course, this one scuba-dives and show you the incredible underwater world.

The underwater voyage starts from the assets and portfolios, you will find an amazing elaboration of Efficient Frontier, Sharpe Ratio and Capital Asset Pricing Model and how they are related to each other. Understanding single each of these concept probably won’t be easy, but the course truly demonstrated a wonderful learning path for you.

Then the course shows you the problems you will face when implementing mean-variance, how to improve with optimization strategies and estimation strategies, taking ETFs as an example to help you digest. These problems lead you to the popular measurement Value at Risk (VaR) and Conditional VaR. Also keep in mind the statistical bias, survivorship bias and data snooping (which probably will remind you of the skills you learned in machine learning).

Next, risk management is under the spotlight. Black-Scholes model visited again, but more attention is paid to delta-hedging and volatility surfaces, and how to use them to pricing some types of derivatives.

The journey is not over yet, next is the monster: CDOs (Credit Debt Obligations) and the notorious Gaussian Copula model. I am afraid there are so many people are interested in this, because of its linkage to the financial crisis. It is amazing to appreciate that there are smart and innovative people who created such a complicated product, but equally amazing to see how it will gone mad and out-of-control. I love this part.

The last sections covers some application of financial engineering. I am impressed to see options theory could be used to evaluate non-financial investment and decision-making, for example: when to upgrade a machine in production environment. You probably will be surprised that risk-neutral probability visited again!

I am very proud that I completed this challenging course.

Quick Recap

My Certificate

Certificate Financial Engineering and Risk Management Part II
Financial Engineering and Risk Management Part II

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