What Is Financial Engineering?

Financial engineering is nothing more than the creation of new and interesting financial tools, often accomplished through the use of mathematic modeling and computer engineering. Financial engineering is really where the majority of innovation is occurring in the field of finance.

Financial engineering is a bit like the science lab of the world of corporate finance, where brand-new ideas are developed and tested. These innovations may include new types of analytics, new investments, new debt, new transactions methods, new strategies, new types of accounts, and brand new ways for corporations to improve their financial efficiency and overall financial well-being — assuming, of course, that they know how to utilize the tools available to them.

In order to understand this field of financial engineering with all its broad, new, and often experimental activities, break it down into some of the most common, most recent, and most successful trends to come from the last few decades.

The bottom line is this: Be careful when it comes to unique and exotic financial tools and products. If you’re not certain about what you’re doing, ask an expert (which doesn’t include the person trying to sell you something).

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