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MSc in Financial Engineering

Program Structure

Compulsory Modules
FE 5101/FE 5101D Derivatives and Fixed Income
Basic theories of futures, options, and swaps pricing. Fundamental concepts of no arbitrage equilibrium and also risk
premia. Hedging techniques and the Greeks. Fixed Income securities analytics. Yield curve analyses. Extensions to
asset-backed securities and asset securitization issues. Structured notes and embedded options. Corporate debts and
convertibles.

FE 5107/FE 5107D Risk Analyses and Management


Market risk. Value-at-Risk measures and problems. Parametric historical, and simulations VAR. Alternative securities
risk and derivatives risk measurements. Delta-normal VARs and applications to different products. Credit risks and
measurements. Liquidity, operational risk, legal risk, settlement risk, model risk, tax risk and others, Stress testing,
Accounting and legal compliance. Some existing models and Risk Management best practices.

FE 5110 Financial Engineering Project


Students are encouraged to work on a project related to an actual problem at work involving financial engineering
solutions. Otherwise students could work on a new product or process idea, or a detailed case study. The report about
60x double-spaced A4 pages including appendixes should be carefully written and submitted.

FE 5112/FE 5112D Stochastic Calculus and Quantitative Methods


This module will cover the fundamental concepts of stochastic calculus as well as quantitative methods that are
relevant to financial engineering. The topics include Wiener processes, stochastic integrals, stochastic differential
equations, Itos lemma, the martingale principle and risk neutral pricing. It will also cover important topics in linear
algebra and optimization.

FE 5116/FE 5116D Programming and Advanced Numerical Methods


This module will cover both computer programming and numerical methods. On the programming side, this module will
cover Octave language. The emphasis will be given to programming to solve financial engineering problems. On the
numerical methods side, this module will cover finite difference, discretization and Monte Carlo simulation methods.

FE 5209 Financial Econometrics


The statistical modelling and forecasting of financial time series, with application to share prices, exchange rates and
interest rates. Market microstructure. Specification, estimation and testing of asset pricing models including the capital
asset pricing model and extensions; Modelling of volatility. Practical application of volatility forecasting. Estimating
continuous time models.

Elective Modules
FE 5103 Equity Products and Exotics
Covered warrants, equity warrants and options, subscription rights, stock index futures and options, and other equity
derivatives. Issues of pricing and hedging. Institutional constraints. Portfolio management and other investment
strategies. Path-dependent options such as Asian options, barrier options, lookback options, and forward-start options.
Spread options, rainbow options, quantos, exchange options, basket options, as-you-like options, power options, digital
options, and others. Pricing techniques and risk management purposes.

FE 5105 Corporate Financing and Risk

Financial Markets and Instruments. Management of foreign exchange, money market, and derivatives desks. AssetLiability management. Regulatory issues. Corporate Valuation, restructuring, leveraged buyouts, mergers and
acquisitions. Issues of deal structures and management of cashflows.

FE 5108 Portfolio Theory and Investments


Portfolio Optimisation Theory. Capital Asset Pricing Models. Arbitrage Pricing Theories. Factor Models. Market Neutral
Strategies. Abnormalities and Market Mispricing. Asset Allocation and Dynamic Portfolio Optimization. Portfolio
Insurance Problems, and Global Funds Management.

FE 5208 Term Structure and Interest Rate Derivatives


This module will cover both term structure models as well as the valuations of interest rate derivatives. The topics
covered include Vasicek , Ho-Lee, Cox-Ingersoll-Ross (CIR), Heath-Jarrow-Morton (HJM) and LIBOR market models.
On the numerical side it will cover Black-Derman-Toy (BDT) and Hull-White models as well as some simulation
methods.

FE 5210 Research Methods in Finance


This module aims to facilitate students in developing the basic skills for independent research, and to promote their
motivations and interests in finding and solving problems. During the study of a research question, students are to
demonstrate their progress in acquiring techniques, and to develop presentation skills including effective oral
communication and scientific research report writing. Offerings of this module in different years may have different
areas of focus.

FE 5211 Seminar in Financial Engineering


Topics relating to financial engineering.

FE 5215 Seminar in Financial Product Innovations


New topics and areas in financial products development and market applications.

FE 5216 Financial Technology Innovations Seminar


New topic and areas in financial technologies including information technology applications, electronic commerce, and
other electronic applications to finance problems.

FE 5217 Seminar in Risk Management and Alternative Investment


Topics would cover various alternative investments and risk management.

FE 5218 Credit Risk


The course consists of two parts - (i) statistical credit rating models and (ii) credit derivatives. The first part would cover
various statistical credit rating models including Altmans Z-score, logistic regression, artificial neural network and
intensity models. The second part will cover various models used to price credit derivative as well as tools used to
manage credit risk. The topics covered would include real and risk neutral probabilities of default, RiskMetricsTM,
CreditRisk+, default correlation, Copula, Basket default swap, CDOs etc.

FE 5219 Credit Analytics Practicum


This module will provide students with the opportunity to work on real-world problems in quantitative credit analysis.
The module will be project based within either a research or industry environment. Students will gain a detailed
knowledge of the project subject matter, along with an overall understanding of quantitative credit analysis.
The projects will be group-based with up to three students in a group. Most of the groups will be based in RMIs Credit
Research Initiative, and students can also source for an external company to host their projects.

FE 5221 Trading Principles & Fundamentals


This module aims to familiarize the students with the reality of trading within the financial markets environment. Beyond
the pure trading principles, it covers the many aspects of trading decisions, in terms of risk control and limits, market
and economic data and information, overall portfolio management, practical market standards and conventions,
specificities of derivatives trading, trading styles and techniques to manage specific market situations.
This module should prepare students to better grasp trading and financial markets and allow them to become effective
in a work environment in a record short time.

FE 5222 Advanced Derivatives Pricing


This module will cover the advanced topics related to derivative pricing, including stochastic differential equations,
martingale representation theorem and risk-neutral pricing, the change of numeraire argument and pricing of
pathdependent options (e.g. barrier, lookback, and Asian options), optimal stopping and American options, jump
diffusion processes and stochastic volatility for option pricing.

FE 5223 Introduction to Electronic Financial Market


The fundamentals of financial market technologies and functionality in the Front-, Middle- and Back-offices, the
interdependencies of their systems, typical user interfaces, through to typical system architecture will be taught.
Principals of algorithmic trading will also be covered, and students will be challenged to design solutions for real-market
trading strategies.