How did this profession come about?

Financial engineering as a science was formed in the late 1980s. Scientists-economists sought to get answers to important questions: how companies can effectively manage their funds, how to carry out financial transactions with the least losses, and how financial instruments should be used in a given situation. These answers could help both corporations and individuals who have invested in reducing risks and increasing profits. A variety of theories and strategies have been developed on how to manage risks or how to try to avoid them altogether.

In parallel, the process of the formation of new financial instruments based on technologies was under way. Therefore, the financial engineer as a profession of the future is at the intersection of three disciplines: mathematics, economics and programming. Today, a financial engineer simulates financial processes - he tries to understand by what mathematical laws a stock or bond is traded on the market; is engaged in statistical analysis - based on the analysis of big financial data, he builds an optimal trading strategy for the customer; assesses risks, including insurance and credit. At the same time, a significant part of the work of a financial engineer falls on programming, automation of processes that have historically been done manually. Thus, the number of ordinary banking employees is decreasing, and the number of specialists working with modern financial technologies is constantly growing.

Let's see what innovative technologies can be introduced and effectively applied by a financial engineer.

What technologies does a financial engineer work with?

Roboadvising

The roboadvising technology appeared in the USA several years ago and is an electronic advisor or robot advisor. It was created for those who would like to start investing their funds, but doubt their ability not to lose all their money. In fact, electronic advisors help those who previously used only the simplest bank deposits to enter the stock market.

For example, this technology is suitable for older people who are not very comfortable doing complex analytical work. A robot assistant that works according to clear algorithms will help them invest their retirement savings profitably. The main thing is to understand that robo-advising is not used for active trading; it uses passive strategies aimed at making a profit in the long term. But, on the other hand, the client of an automated assistant risks almost nothing, and his services are much cheaper than the work of a professional manager.

M2M systems

M2M (Machine-to-Machine) is the general name for technologies that allow devices to communicate with each other. These are wired and wireless sensor systems that transmit information from one device to another. Machine-to-machine transactions (financial transactions) allow you to automate payments and other financial transactions within the Internet, excluding a person from the process. So, the decision about financial transactions (for example, about buying a cartridge for a printer or refueling a car) is made by the machine autonomously, taking into account the user's preferences, as well as based on the data accumulated in the cloud service that transmit other "things".

Much more complex transactions, including insurance and tax procedures, are gradually being fully automated. In the future, using distributed ledger technology, a global information network can be created, within which people and machines will be able not only to instantly make payments and transactions, but also exchange any types of assets, including intellectual property objects around the world.

Crowdfunding

A crowdfunding specialist deals with the issues of attracting private, "small" investments from ordinary people who liked the idea of a project - it can be a computer game, a fantasy novel , useful mobile application, music album. But crowdfunding is not just about posting an idea on a website and waiting for the "people" to shower you with money. Usually there is a long preparatory process: collecting all the materials, videos, organizing supporters. And a convenient and functional service is also very important, where you can place your project. A financial engineer can help create effective crowdfunding tools. At the same time, he communicates both with the authors of the idea and with those who finance the project.

Blockchain

Banking and payments is an ideal area for blockchain applications, which you can read more about in the blockchain engineer profession. First of all, the technology ensures complete security of transactions (money transfer). Neither the attacks of fraudsters, nor the possible mistakes of the employees of the financial institution will be able to interfere with such operations - the system will do everything by itself and will reliably save all the data about the transaction, which in this case will not be stored in one place.

Another aspect is the absence of intermediaries, unnecessary links in the chain of transferring funds from one organization to another, each of which takes its own commission. With blockchain, the party to the transaction does not spend unnecessary funds and deals with completely transparent operations. Financial engineers can test and implement blockchain systems in traditional banks - for now, as an experiment.