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Investment banking is one of the most sought after career amid the finance students. In fact, most of the finance students have their career planned with careful precision – numerous internships to gain qualified experience of working in the investment banking industry and learn more about the finance terms about which they have just read.
Terms like financial engineering and reference data are the latest terms that are in frequent use in the banking industry.
But wait!
What is financial engineering and what role does it play in investment banking industry? For that matter what is Reference Data and why does an investment banker need Reference Data?
Keep reading to find the answers to the above questions. For an aspiring investment banker, it is imperative to know all the answers before she jumps into solution finding route.
Financial Engineering and Investment Banking Industry!
Starting with Financial Engineering – what is financial engineering?
Industry experts define Financial Engineering as the study of applying mathematics, statistics, computer science, along with economics theory in addition to any other quantitative methods that are needed to analyze and model markets.
Precisely the reason why most of the financial engineers come from quantitative backgrounds like statistics, mathematics, economics, statistics, engineering and other similar fields. Reason: These are the fields where students are taught to build models and have strong foundations in Mathematics, statistics, and even programing.
In simple words – financial engineers work at the crossroads of data science and finance.
Right, but where does Reference Data come into play. Before we answer that one let’s understand what is Reference Data.
Reference Data, Financial Engineers and Investment Banking
Reference Data is defined as the identifiers that are required and help in describing the trade between counterparty and security. In the financial sector counterparty is defined as a set of entities with associated risk, and security is a financial asset/product/instrument that can be traded.
Interesting to note here is the fixed standard of Reference Data governed by concerned regulatory authorities and doesn’t change much over a period of time. Reference Data not only includes the description of equity asset but also defines the name of the buyer, seller name, and costs involved.
So now that we know what is financial engineering and reference data let’s understand how investment bankers use both to solve complex issues.
It is clear that financial engineers work at the crossroads of data science and finance and reference data is used across all the systems of an investment bank. Reference data helps investment banks
- in exposure reduction
- Reduces counterparty credit risk
- Managing capital and liquidity
An investment banker achieves all this through leveraging an intelligent data platform. And this is where financial engineering comes into play.
Using Reference Data as a base, financial engineers apply various methods to identify and solve numerous problems an investment bank might be facing.
All this sounds interesting? Yes! Well it is indeed interesting to become a financial engineer and while your regular studies will help in getting you the job of a financial engineer, it is always suggested to for investment banking certifications from reputed credentialing bodies.
Investment Banking certifications will teach you all you need to know about reference data and financial engineering – and their separate roles in the investment banking industry. Investment Banking industry is one of the thriving industries today and if you wish to be a part of it then certification will only give you the needed edge to beat the competition and stand tall in the crowd.
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