Financial Engineering Salaries

Myron Scholes and Fisher Black (1938 – 1995), both from the University of Chicago are the authors of the Black-Scholes Equation, which won them a Nobel Memorial Prize in Economic Science in the year 1997. Financial Engineering Salaries

The award was a recognition of their work in devising a new method to determine the value of stock options and derivatives. The Black-Scholes model, soon after its inception in the year 1973, became the de-facto industry standard for the valuation of derivative instruments in financial markets worldwide. The equation was first published in the Journal of Political Economy in May 1973, titled as “The Pricing of Options and Corporate Liabilities”. Financial Engineering Salaries

The co-author of the paper, Fisher Black, died in the year 1995. As the Noble Prize is not awarded posthumously, Myron Scholes shared his award with Robert C. Merton of the Harvard Business School. Merton had submitted an independent paper during the same period, drawing almost the same conclusions as those made by Fisher and Scholes. Financial Engineering Salaries

The valuation of stock options, factoring in the risk element, was a major development in the field of Economics, which also helped the options market to develop into a viable investment proposition for millions of investors across the globe. The option-pricing model devised by Black and Scholes isolated the vital elements that are essential for the determination of a correct pricing. The elements were: Financial Engineering Salaries

I. Today’s share price.

II. The volatility of the share price.

III. The risk free interest rate.

IV. The probability that the option would be exercised.

According to William F. Sharp, Professor of Finance, “financial economics deals with four major phenomena; time, uncertainty, options and information. Black, Merton, and Scholes provided the theory from which our understanding of options has been built”.

Key Skills Required         Financial Engineering Salaries

If you aspire to be a financial engineering specialist, you have to be a number crunching maniac and a person who loves to read financial reports of companies. In fact reading financial reports and analyzing them to death, along with a super math potential, is the best indicator of aptitude. The schools in the US like Columbia, NYU, Cornell offer graduate programs that are known for their rigor and practice. Financial Engineering Salaries

Students who desire to pursue a course in Financial Engineering should note that, unlike the stress on theoretical learning in India, the US system is more reliant on practical work and self-study. If you aspire to pursue a career in this field, you must ready yourself to battle with very high end Math and Statistics. The good thing is that the professors on campus are always willing to help you and so are the many senior students, if you ask them for assistance.   Financial Engineering Salaries

Starting Salaries

Financial Engineering graduates are employed in key banking and investment sectors. They play a very decisive role in the organizational hierarchy and therefore command a salaries ranging from USD$50,000 as initial pay, which can rise up to USD$150,000. The average pay packets from top rung schools range from USD$70,000 to USD$125,000. It is not surprisingly that after a few years of experience, you could end up making anywhere between USD$175,000 to USD$400,000.      Financial Engineering Salaries

These figures, one hopes, are enough motivation for you to gear up and do your best.   Financial Engineering Salaries