Financial Risk Strategy

With the explosive growth of derivative securities such as options, futures and swaps, as well as an ever expanding set of newly designed securities such as mortgage-backed securities and structured notes, the demand for people with distinct competencies in this subject area has grown. Responding to this demand, the University of Alabama's Department of Economics, Finance and Legal Studies offers a full year sequence of classes focusing on modern techniques for managing financial risk.

The Financial Risk Strategy Track within the master of science in finance is available to students with a strong quantitative mathematics background. This track is designed to offer advanced applied expertise in financial engineering. The main focus of this track is mastering modern techniques for managing financial risk. Students selecting this concentration will have the opportunity to be trained in state-of-the-art techniques in valuing and using derivative securities, with a particular emphasis on mortgage-backed securities, structured notes and computer-based solution design within an object-oriented framework.

Couched within the highly rigorous master of science in finance, the general course sequence is as follows:

FI 519 Financial Engineering covers the basic characteristics of options, futures and swaps. Attention is given to fundamental pricing technologies such as arbitrage, binomial lattices, and methods involving geometric Brownian motion. General institutional details are given in a global context. Many valuation problems, such as pricing interest rate swaps, are illustrated using spreadsheet technology.

FI 520 Advanced Financial Engineering extends the FI 519 material by introducing the object-oriented approach to problem solving using the computer language C++. Attention is given to lattice technologies of interest rate contingent claims such as Black, Derman and Toy, Hull and White, and others. This course also illustrates valuation procedures involving Monte Carlo simulation. This procedure is widely used to value mortgage-related securities.