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USC Viterbi Professor of Electrical, Aerospace, and Mechanical Engineering Petros Ioannou |
Petros Ioannou, Professor of Electrical Engineering with joint appointments in Industrial Systems Engineering and in Aerospace and Mechanical Engineering developed a groundbreaking interdisciplinary program in Financial Engineering with the help of his colleagues at USC Viterbi, the Marshall School of Business and the USC Dornsife Department of Economics. The program is designed to help masters students outpace the competition in the financial industry, including investment banking, hedge funds and corporate risk management. By applying skills in engineering, mathematics, and finance students not only learn how the industry works but also how to excel in global markets which are constantly in flux.
What is financial engineering?
Financial engineering is a multidisciplinary field that applies engineering methodologies to problems in finance. It is a relatively new discipline that came about in response to the rapid proliferation of low cost computers and software that trades millions of dollars from one corner of the globe to the other at a fraction of a second. Our financial system today is incredibly complex and the human brain cannot take into account all the possible effects in order to perform accurate analysis and make reliable predictions. By learning the appropriate mathematics, taking the engineering approach to finance, and exploiting the availability of computers and software tools, you will be able to make better decisions, invest wisely, and improve your portfolio.
Why did you decide to start this program at USC and when was it created?
The idea came from the USC Viterbi Dean Yannis Yortsos. I was part of the committee to develop the program and I ended up playing a lead role in its development and administration. We accepted our first class of students in the fall of 2010.
How does an education in financial engineering help students outperform their competition?
The Financial Engineering program helps students outperform their competition by applying the engineering tools of optimization, stochastic processes (such as probability and statistics), system theory, and computer programming so students can handle complex financial problems with confidence.
One thing that this program teaches the students very well is risk management. It is all about balancing risk and return. On one extreme you can put your money in a pillow and that's zero risk, but if you want a return in five years from now you are presented with a much more challenging scenario of different risk levels. Not many people are able to effectively assess these scenarios and analyze how much risk they are willing to take for an expected return.
Is there an increasing demand in the global market for financial engineers?
The complexity of financial markets coupled with the availability of low cost computing power has created a growing demand for those people who can apply advanced mathematics and engineering to provide solutions to complex problems that cannot be solved using traditional approaches.
A degree in financial engineering best prepares students for what kinds of occupations?
Financial Engineering can be applied to many different fields such as equity, bonds, commodities, derivatives, and swaps. Our students are well prepared for jobs at huge portfolio investment companies such as Goldman Sachs, Barclays, and also various governmental agencies. In fact, by knowing these tools and these ideas you are well prepared to manage your own finances if you so choose.
How many years does it take to complete the financial engineering program and what kinds of courses are taught?
Normally, the program lasts for three semesters or a year and half. However, some students are able to complete the program in just one year.
Of the nine courses offered, four of them are in finance and economics. The other five teach optimization, stochastics, and programming.
How can an education in financial engineering help students protect themselves against the economic recession?
A key element of the program is to understand risk by being able to model it and analyze its impact using mathematics and computer simulations. Unfortunately, most people in the market don’t fully understand the risk of investment. Right now the stock market is going up so everybody is going in, but people forget that it could go down. You can lose. For example, if you have kids going to school and you have $500,000 saved for their education you might want to reconsider investing that money into the stock market. However, if you have $500,000 and need the money ten years from now, you can invest in the stock market and ride the waves as it goes up and down. But not many people are able to appropriately balance risk and return. Not many people can read spreadsheets and effectively analyze whether these companies are safe investments and what kind of return or loss they might receive.
These examples are of course far simpler than what financial engineers deal with, but the principles of risk comprehension and financial literacy remain crucial.
What separates USC's Financial Engineering Program from similar programs at other universities?
A lot of universities have programs called financial engineering, but most of these programs are within the business school and do not involve a lot of engineering courses. At USC, the Financial Engineering Program is within the school of engineering. That makes a huge difference because by taking the engineering approach to finance, we are able to dive much deeper.
Additionally, the program is uniquely offered as a distant learning program where students can attend lectures and learn valuable information from the comfort of their own homes.
Who can apply for the program?
The application deadline for our fall class is January 15th and September 15th for the spring. An undergraduate degree in engineering, math or hard science from a regionally accredited university is preferred. Applicants with undergraduate degrees in finance, accounting and similar disciplines are also eligible to apply.
For more information, click here.
