FINANCIAL ENGINEERING: STAGES OF EVOLUTION AND THEIR ESSENTIAL CHARACTERISTICS
Abstract
The article reflects the process of evolution of financial engineering as a direction in the development of financial technologies - from the simplest to complex modern ones. Based on the results of research published in leading scientific publications and a thorough study of a wide range of sources covering the period of the second half of the 19th century - the first quarter of the 21st century, four periods have been distinguished that reflect the specifics of the formation and development of financial engineering. They are presented in the author's periodization, which has a logical justification, supported by relevant facts and essential characteristics. So, the 1st period covers 550 BC. - 60 years of the 19th century. Its main content was the formation of basic approaches to solving financial issues, natural for the process of establishing and establishing market relations. The specifics of the 2nd period, covering the 70-90s of the 19th century, were determined by the contemporary needs of the "capitalist economy." The task of financial engineers was to find new optimal approaches to the financial provision of business, whose representatives quite naturally sought to maximize profit. In the 3rd period, which lasted from 1900 to the 1960s, financial engineering, as before, continued to perform its traditional functions. In addition, in the mentioned period, there was an accumulation of interdisciplinary knowledge "for a qualitative leap". The 4th period began in the 70s of the 20th century. Since then, financial engineering has developed particularly rapidly, which is recognized at the international level. This period is characterized by the widespread use of innovative financial instruments developed on the basis of interdisciplinary developments developed earlier. It is also confirmed on the basis of published sources that the term "financial engineering" has been widely used since the second half of the 19th century. And in the first half of the 20th century. the basics of financial engineering were taught in certain universities and colleges, primarily in the USA and Canada. It was concluded that at each stage of its development, financial engineering was associated with the development of innovative financial instruments (approaches) that corresponded to the interests of certain groups of market participants.
References
Безлюдна К.О., Бобир О.І. Управління проєктами як складова частина фінансового інжинірингу. Економічний простір. 2021. № 175. С. 120–125.
Величкін В.О., Тимошенко М.В. Фінансовий інжиніринг: навчальний посібник .Дніпро : Університет митної справи та фінансів, 2019. 124 с.
Інженерія (інжиніринг). Wikipedia. URL: https://uk.wikipedia.org/wiki/Інженерія
Парубець О., Забаштанський М. Використання інструментів фінансового інжинірингу як основи розвитку територіальних громад. Проблеми і перспективи економіки та управління. 2021. № 4(28). С. 210–216.
Ратушна Ю.С. Фінансовий інжиніринг: особливості, чинники та роль у розвитку фінансового інвестування. Науковий погляд: економіка та управління. 2019. № 2. С. 140–150.
Середа С.А., Виклюк М.І., Іваночко О. В. Необхідність використання фінансового інжинірингу на підприємстві. Підприємництво і торгівля. 2019. Вип. 24. С. 132–136.
Халатур С.М., Гончаренко О.В., Хомук Н.Д. Інструментарій фінансового інжинірингу для комплексної оцінки фінансового стану підприємства. Економiка та держава. 2022. № 1. С. 39–44.
Хвостенко В.С., Меренкова Л.О., Агапова М.Ю. Фінансовий інжиніринг: навчальний посібник. Харків : ХНЕУ ім. С. Кузнеця, 2020. 120 с.
Akyıldırım E. Soner H.M. A brief history of mathematics in finance. Borsa Istanbul Review. 2014. № 14. Р. 57–63.
Arrow–Debreu model. Wikipedia - free encyclopedia. URL: https://en.wikipedia.org/wiki/Arrow%E2%80%93Debreu_model
Atkinson E. Do we need State-Bank Currency? Engineering Magazine 1893. Vol. IV. No. 4. Р. 497–505.
Bachelier L. The Theory of Speculation. Translated by D. May. URL: https://www.investmenttheory.org/uploads/3/4/8/2/34825752/emhbachelier.pdf
Beder T., Marshall C.M. Financial Engineering: The Evolution of a Profession. New York: John Wiley & Sons, 2011. 616 p.
Behan A. Harry Markowitz: Creator of Modern Portfolio Theory. Investopedia. URL: https://www.investopedia.com/terms/h/harrymarkowitz.asp
Bloss M., Ernst D., Häcker J., Sörensen D. Financial Engineering. München: Oldenbourg Wissenschaftsferlag GmbH, 2012. 577 р.
Book Notes. Financial Engineering. Mechanical Engineering. The Journal of the American Society of Mechanical Engineers. 1921. Vol. 43. New York: The American Society of Mechanical Engineers, 1921. 976 р.
Financial Engineering & Risk Management Research URL: https://ieor.columbia.edu/financial-engineering-risk-management
Financial Engineering at Home and Abroad The Banker’s Magazine and Statistical Register. 1875. № 6. Р. 888–897.
Financial Engineering The Banker’s Magazine and Statistical Register. 1875. № 3. Р. 353–360.
Financial Engineering. The Banker’s Magazine and Statistical Register. 1875. № 2. Р. 189–197.
Financial Engineering. Wirtschaftslexikon URL: http://www.daswirtschaftslexikon.com/d/financial_engineering/financial_engineering.htm#fi05H1
Goldman O.B. Financial Engineering. A Text for Consulting, Managing and Designing and Designing Engineers and for Students. New York : John Wiley & Sons, Inc., 1920. 271 p.
Historical Evolution of Financial Engineering URL: https://www.financestrategists.com/wealth-management/investment-management/financial-engineering/
Johnson T. A Brief History of Financial Engineering. URL: https://magic-maths-money.blogspot.com/2009/02/brief-history-of-financial-engineering.html
Kimball D. S. What Are the Universities and Technical Schools Doing to Train Their Undergraduates in Industrial Relations? Chemical and Metallurgical Engineering. 1922. Vol. 26. № 3. Р. 106–108.
Lipton A. Kelvin Waves, Klein-Kramers and Kolmogorov Equations, Path-Dependent Financial Instruments: Survey and New Results 72 р. URL: https://arxiv.org/pdf/2309.04547.pdf
Mark H.A. Louis Bachelier’s «Theory of Speculation» URL: https://f-origin.hypotheses.org/wp-content/blogs.dir/1596/files/2014/12/Mark-Davis-Talk.pdf
Richiards F. Precautionary Hints for Investors. The Engineering Magazine. 1894. Vol. VI. New York: The Engineering Magazine Co., 1894. Р. 853–858.
Samuelson Paul А. Encyclopedia of Quantitative Finance. DOI: https://doi.org/10.1002/9780470061602.eqf01003
Swoboda U.C. Financial Engineering: Voraussetzungen, Chancen, Risiken. Wiesbaden: Springer, 1992. 135 р.
Swoboda Uwe. C. Financial Engineering: Voraussetzungen, Chancen, Risiken. Infos. URL: https://www.lehmanns.de/shop/wirtschaft/18866312-9783409141369-financial-engineering
Tapiero Ch.S. The Future of Financial Engineering. Research Paper, New York: 2013. 23 р.
Tuovila А. Financial Engineering. Investopedia URL: https://www.investopedia.com/terms/f/financialengineering.asp
Would Consider Intelligence Above all in Choosing Cabinet. Speaks Before U. C. Lit. The Varsity. The Undergraduate Newspaper University of Toronto. 1932. November 2nd. Wednesday, Vol. LІІ. № 24. Р. 1.
Bezlyudna K. O., Bobyr O. I. (2021) Upravlinnya proyektamy yak skladova chastyna finansovoho inzhynirynhu. [Project management as a component of financial engineering]. Ekonomichnyy prostir, no. 175, pp. 120–125. (in Ukrainian)
Velychkin V. O., Tymoshenko M. V. (2019) Finansovyy inzhynirynh: navchalʹnyy posibnyk [Financial engineering: textbook]. Dnipro: University of Customs and Finance. 124pр. (in Ukrainian)
Inzheneriya (inzhynirynh) [Engineering]. Wikipedia. Available at: https://uk.wikipedia.org/wiki/Інженерія (in Ukrainian)
Parubetsʹ O., Zabashtansʹkyy M. (2021) Vykorystannya instrumentiv finansovoho inzhynirynhu yak osnovy rozvytku terytorialʹnykh hromad [Problems and prospects of economics and management]. Problemy i perspektyvy ekonomiky ta upravlinnya, no. 4(28), pp. 210–216. (in Ukrainian)
Ratushna Yu.S. (2019) Finansovyy inzhynirynh: osoblyvosti, chynnyky ta rolʹ u rozvytku finansovoho investuvannya [Financial engineering: features, factors and role in the development of financial investment]. Naukovyy pohlyad: ekonomika ta upravlinnya, no. 2, pp. 140–150 (in Ukrainian)
Sereda S. A., Vyklyuk M. I., Ivanochko O. V. (2019) Neobkhidnistʹ vykorystannya finansovoho inzhynirynhu na pidpryyemstvi [Necessity of using financial engineering at the enterprise]. Pidpryyemnytstvo i torhivlya, vol. 24, pp. 132–136 (in Ukrainian)
Khalatur S. M., Honcharenko O. V., Khomuk N. D. (2022) Instrumentariy finansovoho inzhynirynhu dlya kompleksnoyi otsinky finansovoho stanu pidpryyemstva [Financial engineering toolkit for comprehensive assessment of the company's financial condition]. Ekonomika ta derzhava, no. 1, pp. 39–44 (in Ukrainian)
Khvostenko V. S., Merenkova L. O., Ahapova M. Yu. (2020) Finansovyy inzhynirynh: navchalʹnyy posibnyk [Financial engineering: textbook]. Kharkiv: KHNEU S. Kuznetsya, 120 р. (in Ukrainian)
Akyıldırım E., Soner H. M. (2014) A brief history of mathematics in finance. Borsa Istanbul Review, no. 14, pp. 57–63.
Arrow–Debreu model. Wikipedia. Available at: https://en.wikipedia.org/wiki/Arrow%E2%80%93Debreu_model
Atkinson E. (1893) Do we need State-Bank Currency? Engineering Magazine, vol. IV, no. 4, pp. 497–505.
Bachelier L. The Theory of Speculation. Translated by D. May. Available at: https://www.investmenttheory.org/uploads/3/4/8/2/34825752/emhbachelier.pdf
Beder T., Marshall C. M. (2011) Financial Engineering: The Evolution of a Profession. New York: John Wiley & Sons. 616 p.
Behan A. Harry Markowitz: Creator of Modern Portfolio Theory. Investopedia. Available at: https://www.investopedia.com/terms/h/harrymarkowitz.asp
Bloss M., Ernst D., Häcker J., Sörensen D. (2012) Financial Engineering. München: Oldenbourg Wissenschaftsferlag GmbH. 577 р.
Book Notes (1921) Financial Engineering. Mechanical Engineering. The Journal of the American Society of Mechanical Engineers, vol. 43. New York: The American Society of Mechanical Engineers, 976 р.
Financial Engineering & Risk Management Research Available at: https://ieor.columbia.edu/financial-engineering-risk-management
Financial Engineering at Home and Abroad. (1875) The Banker’s Magazine and Statistical Register, no. 6, pp. 888–897.
Financial Engineering. (1875) The Banker’s Magazine and Statistical Register, no. 3, pp. 353–360.
Financial Engineering. (1875) The Banker’s Magazine and Statistical Register, no. 2, pp. 189–197.
Financial Engineering. Wirtschaftslexikon. Available at: http://www.daswirtschaftslexikon.com/d/financial_engineering/financial_engineering.htm#fi05H1
Goldman O. B. (1920) Financial Engineering. A Text for Consulting, Managing and Designing and Designing Engineers and for Students. New York: John Wiley & Sons, Inc. 271 р.
Historical Evolution of Financial Engineering. Available at: https://www.financestrategists.com/wealth-management/investment-management/financial-engineering/
Johnson T. A Brief History of Financial Engineering. Available at: https://magic-maths-money.blogspot.com/2009/02/brief-history-of-financial-engineering.html
Kimball D. S. (1922) What Are the Universities and Technical Schools Doing to Train Their Undergraduates in Industrial Relations? Chemical and Metallurgical Engineering, vol 26, no. 3, pp. 106–108.
Lipton A. Kelvin Waves, Klein-Kramers and Kolmogorov Equations, Path-Dependent Financial Instruments: Survey and New Results, 72 р. Available at: https://arxiv.org/pdf/2309.04547.pdf
Mark H. A. Louis Bachelier’s «Theory of Speculation». Available at: https://f-origin.hypotheses.org/wp-content/blogs.dir/1596/files/2014/12/Mark-Davis-Talk.pdf
Richiards F. (1894) Precautionary Hints for Investors. The Engineering Magazine. Vol. VI. New York: The Engineering Magazine Co, pp. 853–858.
Samuelson Paul А. Encyclopedia of Quantitative Finance. DOI: https://doi.org/10.1002/9780470061602.eqf01003
Swoboda U. C. (1992). Financial Engineering: Voraussetzungen, Chancen, Risiken. Wiesbaden: Springer. 135 p.
Swoboda Uwe. C. Financial Engineering: Voraussetzungen, Chancen, Risiken. Infos. Available at: https://www.lehmanns.de/shop/wirtschaft/18866312-9783409141369-financial-engineering
Tapiero Ch. S. (2013) The Future of Financial Engineering. Research Paper, New York. 23 р.
Tuovila А. Financial Engineering. Investopedia. Available at: https://www.investopedia.com/terms/f/financialengineering.asp
Would Consider Intelligence Above all in Choosing Cabinet. Speaks Before U. C. Lit. The Varsity. The Undergraduate Newspaper University of Toronto. 1932 November 2nd. Wednesday, vol. LІІ, no. 24.1.
