- Joined
- 6/6/08
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- 1,194
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- 58
it's not just some vague idea of humanity or model citizen that i care about. in every university degree that is being offered, there is certain problem that the professors are exploring and trying to help students to solve. and in so doing, the university contributes to the good of the society. but for fe/qf, the problem it is trying to solve is not so obvious, is it? some may say that fe improves market efficiency and helps create instruments to transfer risks. but is that too trivial a task to solve and one day may become automated or standardised?
How about this: good financial engineering allows anyone to take risks or manage risks in any way they wish to. Say you want to hold a stock for one year but want to sell it for at least $35. You then buy a $35 American put option and wham, insured stocks. Now you can hold onto them for a year, and if they drop past 35, you can get out with $35 a share, and if they go higher than that, you make a profit once you pay off the option premium.
Say you wish to speculate on the fact that a new advertising strategy by google will make it go through the roof a year from now. You can buy naked calls, or even enter into forward contracts to do just that.
Financial engineering revolves around the fact that you take some basic building blocks, such as underlying assets and derivatives, and essentially create any sort of investment strategy for anyone on any agenda.
Remember:
Humans are generalists in consumption and specialists in production.
They have unlimited wants and limited resources.
You do not go wrong by putting more money in people's pockets.
If a civvy builds a new building, I won't give a ****.
If a bioE invents a cure for AIDS, I won't give a ****. (I don't have AIDS and hopefully never will)
Know why most engineers don't get paid jack **** compared to financiers? Because the problems they solve not a lot of people give a **** about.
If you're making people money, who doesn't like more money?