Elective Asks Financial Engineering Students To Solve Society's Big Problems

One would expect students in a Master's in Financial Engineering (MFE) program to study the works of Nobel Laureate economists such as Robert Merton and Myron Scholes, but to throw in writings by management guru Peter Drucker comes as a bit of a surprise.


University of CaliforniaIn the MFE elective Success and Failure in Financial Innovation, the business theorist's seminal ideas on innovation are required reading. That's because this course challenges MFE students to find new applications for their skills.

Success and Failure in Financial Innovation is a course unique to the Haas School. It is just one of the offerings in the school's one-year MFE program, which prepares quantitatively adept students for careers with investment banks, hedge funds, and corporate treasuries. In the course, students analyze cases from traditional financial markets, investigating the factors that lead to success or failure in financial innovation. But they also explore applications for financial engineering in non-traditional arenas.

Haas School Adjunct Professor John O'Brien, who teaches Success and Failure in Financial Innovation and is faculty director of the Haas School's top-ranked MFE Program, believes the world is ready for broader applications of his students' high-level skills. "Innovation occurs at the intersection of knowledge and imagination," he observes. "While the talents of these students are well used in arbitrage, risk management, and securities trading, with imagination, they could be put to use solving some of society's biggest problems."

Pollution, for example? Reducing global emissions is just one innovation opportunity identified and investigated by students in O'Brien's course for final team projects in fall 2006. Emission Credit Capital Partners is a project team that proposed investing in emission reduction projects in developing nations and then delivering emission credits to investors. Other course projects included the Gas Price Relief Initiative, which would allow consumers to earn gasoline credits and then use, bank, or trade them on the open market; and Global Mind Capital, which would create a market connecting investors with professional graduate students in need of financial support and employers in search of prospective talent.

"Most MFE coursework is dedicated to technique—how to control risk, separate luck from skill, and sift through data to separate signal from noise," says O'Brien. "By studying and practicing innovation, this course not only teaches students how to use the many tools at their disposal, it teaches them how to define their own problems."

With their remarkable quantitative expertise, MFE students tip the scales on knowledge. O'Brien, who encourages his students to take their team projects into the marketplace, believes that adding imagination to the mix will keep their—and possibly all of our—options open.

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Haas School Master's in Financial Engineering (MFE) Program

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