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Quantitative Financial Engineering

Course Description

Financial engineering involves the creation of financial products that are aimed specifically at the needs of investors, rather than the conventional approach of defining assets on the basis of borrowers' requirements. Central to Financial Engineering are relative value (sometimes called arbitrage) trading strategies and the structuring of financial products, and the closely associated process of securitisation. Structuring involves the transformation of cash flows derived from an asset and improving the risk profile of the structured product. The contemporary derivative markets are driven by the process structuring, both in terms of transforming cash flows through “swaps” and credit enhancement through credit derivatives.

The programme aims to develop the skills and knowledge required by the modern investment and asset management industry where relative value trading strategies and structuring dominate. The emphasis is on developing a range of practical skills rather than develop an abstract "theory of everything". This reflects the need for practitioners to be able to employ different techniques in the ever changing world of contemporary finance.

The material is based substantially on the PRIMIA syllabus for risk management and the Actuarial Profession’s Specialist Technical (ST) syllabus to value and manage the risks associated with a portfolios of derivatives.

The taught component of the degree makes up 120 credits. There are seven mandatory courses leading to 75 credits and consisting of:

• Enterprise Risk Management (15 credits, Semesters 1) - a comprehensive treatment of Financial Risk Management focusing on quantitative aspects.

• Derivative Markets and Pricing (15 credits, Semester 1) - an introduction to derivative markets and how derivative products are priced.

• Modelling and Tools (15 credits, Semester 2) - the fundamental techniques of deterministic and probabilistic mathematical modelling.

• Financial Engineering (15 credits, Semester 2) - provides a thorough grounding in the mathematics underpinning Financial Engineering. Topics include non-standard derivatives, securitisation and structuring, modelling interest rates (including Libor Market Models and valuing swaptions) and contemporary issues in asset management (relative value and pairs trading strategies).

• Credit Risk Modelling (15 credits, Semester 2) - a detailed treatment of the mathematics underpinning Basel Accord on banking supervision and Solvency II for insurance.

Students will also choose three of the following five optional courses leading to a further 45 credits

• Statistical Methods (15 credits, Semester 1) - a foundation course in probability and statistics.

• Financial markets (15 credits, Semester 1) - an introduction to the financial markets.

• Time Series Analysis and Financial Econometrics (15 credits, Semester 2) - analysis and modelling of financial data.

• Modern Portfolio Theory (15 credits, Semester 2) - classical portfolio theory based on maximising expected utility

• Bayesian Inference & Computational Methods (15 credits, Semester 2) - a course on modern Bayesian statistical inference and involving implementing the Bayesian approach in practical situations

Visit the Quantitative Financial Engineering page on the Heriot-Watt University website for more details!

Student Profiles

School of Mathematical and Computer Sciences Early BIrd Scholarship - No. of awards TBC

The School of Mathematical and Computer Sciences are offering a 10% scholarship to all applicants who accept their offer (conditional or unconditiona), before 31st March 2014. The award will be given as a tuition fee discount and applied directly to your tuition fee account after enrolment.

Value of Scholarship(s)

10% discount on the tuition fee cost of your programme


Early Bird scholarships will be awarded to all self-funding applicants who accept their place on a taught MSc programme in the Department of Actuarial Mathematics and Statistics or the Department of Mathematics before 31st March 2014.

Application Procedure

Please return your Reply to Offer form before 31st March 2014 to indicate your acceptance of our offer and you will automatically qualify for the scholarship.

Further Information



MACS Postgraduate Scholarships - No. of awards TBC

Colin Maclaurin Scholarship – some scholarships of £3,500 will be awarded to outstanding applicants to our MSc in Actuarial Science and MSc in Actuarial Management. Jacob Bernoulli Scholarship – 4 scholarships of either a 10% or 15% discount on the tuition fee cost will be awarded to outstanding applicants to our MSc in Quantitative Financial Risk Management. Thomas Gresham Scholarship – significant scholarships will be awarded to outstanding applicants to our MSc in Quantitative Financial Engineering. There is no need to apply – these will be awarded on the basis of outstanding academic merit. Mathematics Scholarship – 3 scholarships of £3,000 will be awarded to outstanding overseas applicants to any of our Mathematics MSc programmes. 1 scholarship of £1,000 will be awarded to an outstanding Home/EU applicant to any of our Mathematics MSc programmes.

Value of Scholarship(s)



Home, EU and Overseas applicants are all eligible to apply for any of the following scholarships. These will be awarded based on outstanding academic merit and financial circumstance.

Application Procedure

Please apply using our online scholarship application form and include information about your academic achievements, motivation for study and financial circumstance. Applications must be submitted before 31st March 2014 and supported by an academic reference - this should be sent directly from the referee by email to [email protected]

Further Information



Postgraduate Taught Funded Places - 10 Awards

The School of Mathematical and Computer Sciences have funding for a number of postgraduate scholarships for the academic year 2015-16 for students who are permanently domiciled in Scotland. The scholarships will cover the full tuition fee cost for studying in 2015/16 and are available for specific programmes which have been selected to support the skills demands in Scotland's key economic growth areas.

Value of Scholarship(s)



According to the terms of the Scottish Funding Council (SFC), you are eligible to apply for a place if you have been living in Scotland for a continuous period of 3 years prior to 1 August 2015. Please note that this does not include residency for the purposes of study only.

Application Procedure

You should apply for the relevant MSc/PG Diploma programme online. Please state your interest for a Postgraduate Taught Funded Place in the 'Additional Information' section of the form. Please also complete and submit a Postgraduate Taught Funded Place application form. This additional form can be completed electronically or printed but must be submitted to us via email or post no later than 1st June, 2015. If you have already applied for your MSc/PG Diploma programmes then please quote your application reference number on your Funded Place application form. Following the deadline, funded places will be awarded to those applicants where we consider the funding will make a difference to them being able to study at postgraduate level. If there are any unfilled places after this first deadline we may re-advertise for additional applications by a new deadline.If you have any queries, please email [email protected]

Further Information


Entry Requirements

Entry requires a UK 2.1 degree or equivalent in Mathematics, Statistics, or a related subject with a substantial mathematics content and some background in derivative pricing.

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