Financial Engineering: A Strategic Risk Management Concept
Article Details
Pub. Date
:
September, 2005
Product Name
:
TREASURY MANAGEMENT
Product Type
:
COVER STORY
Product Code
:
TMCS10509
Author Name
:
Arindam Banerjee
Availability
:
YES
Subject/Domain
:
Finance
Download Format
:
PDF Format
No. of Pages
:
4
Price
For delivery in electronic format: Rs. 50;
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Abstract
The ultimate aim of any modern corporate is growth with profit maximization. Growth is the first and foremost characteristic of nature and its products which include modern societies with all their industrial, agricultural and service sectors and above all the research organizations to cater to the needs of primary, secondary and tertiary sectors. Governed by the laws of the universe and nature, societies, markets and above all human life are in the constant churn of development in the realm of creativity and innovativeness.
Description
Financial engineering (FE) essentially involves the design, development and implementation of financial instruments, processes and strategies to solve the financial problems. In the arena of risk management, the financial engineering has contributed in numerous ways by the introduction of new instruments and strategies. The important innovations among these instruments include the financial derivatives, which are considered to be a fine craft of FE and an important risk management tool. This article discusses the contribution of financial engineering in financial risk management.
The implications for using option pricing models aren't just in the direct financial markets but in being able to use this technology for how we organize nonfinancial firms and how people organize their financial lives in general.
The very evolution of financial engineering (FE) as a concept can be traced back to the emergence of the sophisticated financial derivatives instruments. As an applicative tool, the popularity of this field of study grew out of proportions in the early 1980s. By this time, it became very clear that the world of finance was undergoing a radical change and more so in a fundamental way. This change was partly triggered by the development of the hybrid financial products as well as the remarkable advancements in the advanced researches in financial theories.
