Financial Engineering < University of California, Berkeley

This is an archived copy of the 2015-16 guide. To access the most recent version of the guide, please visit http://guide.berkeley.edu.

About the Program

The Berkeley Master of Financial Engineering (MFE) degree is a full-time, one-year graduate degree offered by the Haas School of Business. Students enrolled in the MFE Program learn to use theoretical finance, mathematics, and computer programming skills to make pricing, hedging, trading, and portfolio management decisions.

Graduates of the MFE Program find positions in commercial and investment banking, insurance and reinsurance, corporate treasuries, corporate strategy, and money management. Specializations include risk management, asset/liability modeling/optimization, security structuring, derivative valuation and trading, consulting, asset management, research, option-based securities valuation, special hedging, and real-option investment analysis.

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Admissions

Admission to the Program

Please see departmental website at http://mfe.haas.berkeley.edu .

Admission to the University

Minimum Requirements for Admission

The following minimum requirements apply to all graduate programs and will be verified by the Graduate Division:

A bachelor’s degree or recognized equivalent from an accredited institution;
A grade point average of B or better (3.0);
If the applicant comes from a country or political entity (e.g., Quebec) where English is not the official language, adequate proficiency in English to do graduate work, as evidenced by a TOEFL score of at least 90 on the iBT test, 570 on the paper-and-pencil test, 230 on the computer-based test, or an IELTS Band score of at least 7 (note that individual programs may set higher levels for any of these); and
Sufficient undergraduate training to do graduate work in the given field.

Applicants Who Already Hold a Graduate Degree

The Graduate Council views academic degrees not as vocational training certificates but as evidence of broad training in research methods, independent study, and articulation of learning. Therefore, applicants who already have academic graduate degrees should be able to pursue new subject matter at an advanced level without need to enroll in a related or similar graduate program.

Programs may consider students for an additional academic master’s or professional master’s degree only if the additional degree is in a distinctly different field.

Applicants admitted to a doctoral program that requires a master’s degree to be earned at Berkeley as a prerequisite (even though the applicant already has a master’s degree from another institution in the same or a closely allied field of study) will be permitted to undertake the second master’s degree, despite the overlap in field.

The Graduate Division will admit students for a second doctoral degree only if they meet the following guidelines:

Applicants with doctoral degrees may be admitted for an additional doctoral degree only if that degree program is in a general area of knowledge distinctly different from the field in which they earned their original degree. For example, a physics PhD could be admitted to a doctoral degree program in music or history; however, a student with a doctoral degree in mathematics would not be permitted to add a PhD in statistics.
Applicants who hold the PhD degree may be admitted to a professional doctorate or professional master’s degree program if there is no duplication of training involved.

Applicants may apply only to one single degree program or one concurrent degree program per admission cycle.

Any applicant who was previously registered at Berkeley as a graduate student, no matter how briefly, must apply for readmission, not admission, even if the new application is to a different program.

Required Documents for Applications

Transcripts: Applicants may upload unofficial transcripts with your application for the departmental initial review. If the applicant is admitted, then official transcripts of all college-level work will be required. Admitted applicants must request a current transcript from every post-secondary school attended, including community colleges, summer sessions, and extension programs. Official transcripts must be in sealed envelopes as issued by the school(s) attended.
If you have attended Berkeley, upload your unofficial transcript with your application for the departmental initial review. If you are admitted, an official transcript with evidence of degree conferral will not be required.
Letters of recommendation: Applicants may request online letters of recommendation through the online application system. Hard copies of recommendation letters must be sent directly to the program, not the Graduate Division.
Evidence of English language proficiency: All applicants from countries or political entities in which the official language is not English are required to submit official evidence of English language proficiency. This applies to applicants from Bangladesh, Burma, Nepal, India, Pakistan, Latin America, the Middle East, the People’s Republic of China, Taiwan, Japan, Korea, Southeast Asia, most European countries, and Quebec (Canada). However, applicants who, at the time of application, have already completed at least one year of full-time academic course work with grades of B or better at a US university may submit an official transcript from the US university to fulfill this requirement. The following courses will not fulfill this requirement: 1) courses in English as a Second Language, 2) courses conducted in a language other than English, 3) courses that will be completed after the application is submitted, and 4) courses of a non-academic nature. If applicants have previously been denied admission to Berkeley on the basis of their English language proficiency, they must submit new test scores that meet the current minimum from one of the standardized tests.

Where to Apply

Visit the Berkeley Graduate Division application page .

Master's Degree Requirements

Unit Requirements: 28 Units

Curriculum

MFE 230A	Investments and Derivatives	3
MFE 230E	Empirical Methods in Finance	2
MFE 230Q	Stochastic Calculus with Asset Pricing Applications	2
MFE 230D	Derivatives: Quantitative Methods	2
MFE 230I	Fixed Income Markets	2,3
MFE 230V	Credit Risk Modeling	2
MFE 230H	Financial Risk Measurement and Management	2
MFE 230O	Applied Finance Project	1-3
Select 28 units of electives from the following:		28
MFE 230W	Accounting and Taxation of Derivatives
MFE 230J	Financial Innovation in a Global Marketplace
MFE 230M	Asset-Backed Security Markets
MFE 230G	Equity and Currency Markets
MFE 230K	Dynamic Asset Management
MFE 230P	Optimization Models in Finance
MFE 230S	Behavioral Finance
MFE 230X	High Frequency Finance
MFE 230T	Topics in Financial Engineering
MFE 293	Individually Supervised Study for Graduate Students

Research Resources

MFE Data Lab

Dedicated lab that includes the following resources: Bloomberg terminals (2), Access to FactSet, DataStream, Thompson Reuters, High Frequency trading server with NYSE TAQ, NASDAQ TotalView-ITCH, and ICAP EBS currency data; Software: Matlab, SPSS, Mathematica, SAS, Visual Studio, EViews, R, OneTick, kdb+, Rotman Interactive Trader, Numerix Bloomberg Edition; TT from Trading Technologies, and WRDS.

High Frequency Trading Lab Manager and Lab Manager

Two staff members assist students with lab and technical needs.

Business and Economics Library at the Haas School of Business

Access to Financial Times, Wall Street Journal, and all library resources.

Professional Development Activities

1. Extensive assistance with placement in internship and full-time positions.

2. Workshops on job search skills, e.g., cover letter/resume writing and interviewing.

3. Financial Practice Seminars with professionals who discuss career paths available and industry needs. Workshops on relevant skills, e.g., programming languages.

For more information, visit our website .

Courses

Financial Engineering

MFE 230A Investments and Derivatives 3 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
The course discusses the basic theories of asset pricing. It begins with the standard discounted cash flow analysis, and generalizes this approach to develop the No Arbitrage Pricing Technique for security valuation. Topics will be fixed income securities, derivatives, contingent claims, basic principles of optimal portfolio theory, models of equilibrium asset pricing, including CAPM and related Factor Models.

MFE 230D Derivatives: Quantitative Methods 2 Units

Offered through: Business Administration
Terms offered: Summer 2017 10 Week Session, Summer 2016 10 Week Session, Summer 2015 10 Week Session
This course emphasizes the pricing of derivatives in continuous time, from the formulation of the pricing problem to the implementation of computational and numerical solution techniques.

MFE 230E Empirical Methods in Finance 2 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
This course reviews probability and statistical techniques commonly used in quantitative finance. It includes a review of normal, lognormal, CEV distribution, estimation and nonparametric techniques commonly used in finance (MLE, GMM, GARCH). Students will be introduced to financial databases and estimation application software to estimate volatilities and correlations and their stability.

MFE 230G Equity and Currency Markets 2 Units

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
This course reviews various aspects of equity and currency markets and their relative importance. It provides models of and historical evidence on the average returns and volatility of returns on equities, on the trade-to-trade equity price behavior, on trading volume and patterns, and primary financial risks. Determination of spot and forward rates and volatility, volume, high frequency dynamics and dealer behavior are examined.

MFE 230H Financial Risk Measurement and Management 2 Units

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
This course examines risk measurement and management including market risk, credit risk, liquidity risk, settlement risk, volatility risk, kurtosis risk and other types of financial risks. Topics will include risk management techniques for different types of contracts and portfolios such as duration, portfolio beta, factor sensitivities, VAR, dynamic portfolio analysis and extreme value analysis and other risk management techniques.

MFE 230I Fixed Income Markets 2 or 3 Units

Offered through: Business Administration
Terms offered: Summer 2017 8 Week Session, Summer 2016 8 Week Session, Summer 2015 8 Week Session
This course provides a quantitative approach to fixed income securities and bond portfolio management. Topics include fixed income security markets, pricing and uses for portfolio management or for hedging interest rate risk, bond mathematics, term structure measurement and theory, immunization techniques, and the modern theory of bond pricing, and derivative instruments.

MFE 230J Financial Innovation in a Global Marketplace 1 Unit

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
This course will stress financial innovation in the traditional financial markets, and innovation opportunities in the newer disciplines of long and short term economic markets. Some examples of the later include livelihood insurance, home-equity insurance, inequality insurance, intergenerational social security, international agreements, and individual pension investment strategies.

MFE 230K Dynamic Asset Management 2 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
This course reviews portfolio theory and pricing models. It includes: risk models for international portfolio returns, models of optimal allocation of funds, exchange rate uncertainty and criteria for judging the performance of managers and models; different types of portfolios/instruments, different types of applications, and strategies to achieve various investment objectives.

MFE 230M Asset-Backed Security Markets 2 Units

Offered through: Business Administration
Terms offered: Fall 2017, Spring 2017, Fall 2016
This course extends the study of fixed income securities to advanced topics on mortage and other asset-backed securities. Topics will include basic mechanics of structuring deals for mortgage-related securities, credit cards, leases, and other debt markets and the risk management techniques employed in the securitization process for these assets. The valuation of pooled assets and derivative bonds using Monte Carlo and option pricing techniques, and trading strategies are also evaluated.

MFE 230N Applied Finance Project 0.0 Units

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
Students will be required to complete an applied quantitative finance project that explores a quantitative finance problem that might be met in practice and involves the development or use of quantitative financial technique.

MFE 230O Applied Finance Project 1 - 3 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
Students will be required to complete an applied quantitative finance project that explores a quantitative finance problem that might be met in practice and involves the development or use of quantitative financial technique.

MFE 230P Optimization Models in Finance 2 Units

Offered through: Business Administration
Terms offered: Fall 2017, Spring 2017, Fall 2016
This course proposes a guided tour through optimization models arising in practical finance. These problems include ones that are traditionally associated with optimization, including asset and liability management, asset pricing, and portfolio optimization. We also describe optimization models arising in model calibration, predication and estimation, and risk analysis. The course includes some recent approaches to the analysis of other kinds of financial data, such as text (financial news) data.

MFE 230Q Stochastic Calculus with Asset Pricing Applications 2 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
The course introduces the students to techniques from stochastic analysis employed in mathematical finance. Topics include: stochastic processes, brownian motion, stochastic integral, differentials and Ito's formula; martingales.

MFE 230R Advanced Computational Finance 2 Units

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
This course builds on the techniques learned in 230D, Quantitative Methods for Derivative Pricing. The focus is to gain a deeper analysis of numerical and computational issues in pricing and calibration. The orientation of the course is hands-on, with heavy use of computational techniques applied to case projects. The primary objective of this course is to prepare students to tackle the latest challenges in quantitative pricing that they are likely to encounter in cutting-edge financial institutions.

MFE 230S Behavioral Finance 1 or 2 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
Over the last 25 years, psychologists have come to better understand the processes by which people make judgements and decisions. They have identified common judgement and decision heuristics and the biases associated with these. An understanding of one's own decision biases and those of others is an important tool for managers. Behavioral Decision Theory has also contributed to our understanding of financial markets. This course will discuss the common biases and heuristics.

MFE 230T Topics in Financial Engineering 1 - 5 Units

Offered through: Business Administration
Terms offered: Fall 2017, Summer 2017 8 Week Session, Spring 2017
Advanced study in the field of finance engineering that will address current and emerging issues. Topics will vary with each offering and will be announced at the beginning of each term.

MFE 230V Credit Risk Modeling 2 Units

Offered through: Business Administration
Terms offered: Summer 2017 8 Week Session, Summer 2016 8 Week Session, Summer 2015 8 Week Session
Focuses on the techniques currently used to model credit risk. The course will cover default probabilities, loss given default, correlation, credit portfolio analytics, bond valuation, loan valuation, and credit derivative valuation. Emphasis will be placed on model building, model validation, and interpreting model output. Students will be required to do some high-level programming in a package such as Matlab. Some empirical testing exercises will also be part of the project work.

MFE 230VA Credit Risk: Economic Concepts 1 Unit

Offered through: Business Administration
Terms offered: Spring 2012, Spring 2011, Spring 2010
Introduction to credit risk modeling and conceptual overview of current techniques. Covers default probabilities, loss given default, correlation, credit portfolio analytics, bond valuation, loan valuation, and credit derivative valuation. Prepares students who are interested in a second course that will focus on model building. Students not interested in the technical details of modeling but who desire an understanding of how credit risk modeling is used in practice will benefit from taking this course.

MFE 230VB Credit Risk: Quantitative Modeling 1 Unit

Offered through: Business Administration
Terms offered: Fall 2017, Fall 2016, Fall 2015
Focuses on the techniques currently used to model credit risk. The course will cover default probabilities, loss given default, correlation, credit portfolio analytics, bond valuation, loan valuation, and credit derivative valuation. Emphasis will be placed on model building, model validation, and interpreting model output. Students will be required to do some high-level programming in a package such as MATLAB. Some empirical testing exercises will also be part of the project work.

MFE 230W Accounting and Taxation of Derivatives 1 Unit

Offered through: Business Administration
Terms offered: Summer 2017 8 Week Session, Summer 2016 8 Week Session, Summer 2015 8 Week Session
This course provides a framework to allow students the understanding of the accounting and tax issues related to derivatives and hedging. It also fulfills the needs of students seeking jobs in the corporate sector and/or seeking securities-structuring assignments in the financial services sector. A basic understanding of financial accounting is required.

MFE 230X High Frequency Finance 1 or 2 Units

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016, Spring 2015
This course introduces basic concepts of high frequency finance and discusses recent developments in market microstructure, electronic trading, and high frequency data modeling. Topics include trading basics and price discovery, distributional properties of financial time series, tick data analysis, trade direction algorithms, trading benchmarks, sources of risk, and trading strategies (including back-testing challenges, benchmark and hedging strategies, and arbitrage and program trading).

MFE 230Y Ethics and Regulation in Financial Markets 1 Unit

Offered through: Business Administration
Terms offered: Spring 2017, Spring 2016
This course is an introduction to the legal rules which govern financial markets and institutions in general but also, specifically related to derivatives. The main purpose of legal rules and regulations is to ensure a smooth functioning of financial markets, as well as the safety and soundness of the overall financial system. We will examine the main areas of law and regulation, as they pertain to the centralized exchanges and the over the counter markets and the role of regulatory arbitrage. We will specifically focus on Dodd-Frank and Basel III and how these rules came about as a response to the financial crisis. We will also explore the role of ethics in filling in the gaps that the law fails to fill.

MFE 293 Individually Supervised Study for Graduate Students 1 - 5 Units

Offered through: Business Administration
Terms offered: Fall 2017, Summer 2017 8 Week Session, Spring 2017
Individually supervised study of subjects not available to students in the regular schedule, approved by faculty adviser as appropriate for the students' programs.