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A review by teelock
Financial Engineering: The Evolution of a Profession by Tanya S. Beder, Cara M. Marshall
5.0
One of the critics of financial engineering is Nassim Taleb, a professor of financial engineering at Polytechnic Institute of New York University who argues that it replaces common sense and leads to disaster. A series of economic collapses have led many governments to argue a return to "real" engineering from financial engineering.
Many other authors have identified specific problems in financial engineering that caused catastrophes: Aaron Brown named confusion between quants and regulators over the meaning of "capital", Felix Salmon gently pointed to the Gaussian copula, Ian Stewart criticized the Black-Scholes formula, Pablo Triana dislikes value at risk and Scott Patterson accused quantitative traders and later high-frequency traders.
A gentler criticism came from Emanuel Derman who heads a financial engineering degree program at Columbia University. He blames over-reliance on models for financial problems.
The financial innovation often associated with financial engineers was mocked by former chairman of the Federal Reserve Paul Volcker in 2009 when he said it was a code word for risky securities, that brought no benefits to society. For most people, he said, the advent of the ATM was more crucial than any asset-backed bond.
Many other authors have identified specific problems in financial engineering that caused catastrophes: Aaron Brown named confusion between quants and regulators over the meaning of "capital", Felix Salmon gently pointed to the Gaussian copula, Ian Stewart criticized the Black-Scholes formula, Pablo Triana dislikes value at risk and Scott Patterson accused quantitative traders and later high-frequency traders.
A gentler criticism came from Emanuel Derman who heads a financial engineering degree program at Columbia University. He blames over-reliance on models for financial problems.
The financial innovation often associated with financial engineers was mocked by former chairman of the Federal Reserve Paul Volcker in 2009 when he said it was a code word for risky securities, that brought no benefits to society. For most people, he said, the advent of the ATM was more crucial than any asset-backed bond.