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A financial engineer works with a variety of different tools to determine the risks and potential of financial investment. These specialists work extensively with mathematical formulas and computer programs in order to create sophisticated models of market trends and risks. Though companies may employ a person with an advanced degree in financial engineering as such an engineer, it is more common for these specialists to work as traders, bankers, or investment managers, and to utilize their financial engineering background in these careers in order to improve the quality of services they can provide to their clients.
One of the main responsibilities of a financial engineer is to know a great deal about financial theory and the behavior of various financial markets. These engineers use this knowledge when creating tools or simulations that will help them to make predictions about the future behavior of a market. Though unexpected events can arise in any financial market, a knowledge of past market behavior and the theory that explains that behavior will help the financial engineer extrapolate from the past to make predictions about the future.
In addition to having a strong foundation in this knowledge base, the financial engineer needs to be adept at computer programming. The engineer uses programs to design simulations of market behavior. Though these programs cannot always predict the way the market will shift, a financial engineer is expected to be able to come up with reasonably accurate results based on the simulations the engineer has designed.
Many financial engineers work in the field of financial risk management. Using a knowledge of the market and computer simulations, a financial engineer can form an investment plan that includes as much of a risk factor as a person or company desires. While it may seem counter-intuitive to desire a greater amount of risk, riskier investments tend to pay off at higher yields than investments that are considered to be more stable. A person or company may turn to a financial engineer to design an investment portfolio that places some, all, or none of the investment capital at risk.
A financial engineer may also work as a financial analyst. These engineers use their knowledge and computer simulations to make predictions about the future behavior of the market. Many people with these skills may work for banks or other financial institutions, though there are also government jobs available for specialists in this field. These specialists may be employed to make recommendations to local, state, or federal government with regard the economy.