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Fin Eng vs Actuarial vs Risk Mgt

Hello, can someone illustrate the differences in the fields of financial engineering, financial risk management and actuarial science? I am particularly confused on the distinction between risk management and actuarial science (both have their separate certification also, namely FRM and professional actuarial exams).

They seemed to be related, yet different. Each of the field also has their own Master degree.

My impression is that MFE is the most quantitative in nature and equips students with the abilities to do modeling of financial markets, risk and pricing of products and understand the assumptions underlying the models. While risk management and actuarial people focus on how to manage risk using the tools developed by financial engineers. And some financial engineers also go into risk management areas to work.

Is my understanding correct? If so, does it mean MFE gives a graduate more career options in modeling, risk management or actuarial science, compared to the other degrees which prepare students exclusively for the risk management areas?

Hope friends on this forum can help to clear my confusion. Thank you!
 

Yuriy

MFE Alum
Financial Engineering is very broad. People trained in FE have skills to handle Risk Management. Actuarial science is not as broad as FE. If you choose an actuarial career, you will be restricted to "do only this". Where as the beauty of FE is that you know a 1000 different things and you can switch between them as you wish and create new ones (the word "engineering"). But thats my opinion :)
 

lalugu

actuarial piggie
Enterprise risk management where you can specialise in the field of actuarial science.

FRM is suitable for those who has a business background who do not know much math.

If u have a strong enough math&programming background(especially math thou since first&foremost, understand the problem), I believe Financial Engineering will treat u the best(imo)!


Hope it helps!
 
Actuaries have a very long history with insurance companies. They are the primary drivers at setting insurance rates, and if you want to work in insurance, it's a great foot in the door. Risk management started at the largest banks (cf. Riskmetrics and JP Morgan), estimating how much could be lost on their inventories of loans and securities, and how best to hedge the bank. Financial engineering started with designing unique financial products for investment banking clients in unusual situations (tax or regulatory constraints), and broadened into securitization and a very wide variety of swaps and option products. The mathematical base is similar (statistics, stochastic calculus, and programming), and there has been some blurring of lines, but if you want to work in insurance, actuarial science is your best shot, and if you want to get on a trading desk, financial engineering is probably best. Risk management is more of a middle-office sort of job in large banks, but there is interaction with the trading desks and the capital markets.
 
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