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April 24: Financial Engineering Case Competition Spotlights Cutting-Edge Application of Mathematics, Computational Finance


Geof Becker

Tepper School's 10th Annual Financial Engineering Case Competition
Spotlights Cutting-Edge Application of Mathematics, Computational Finance

Wharton School Takes Top Honors in Carnegie Mellon Showdown in New York City

PITTSBURGH—A team of graduate business students from the University of Pennsylvania's Wharton School won first prize in this year's Financial Engineering Case Competition (FECC), hosted by the Tepper School of Business at Carnegie Mellon University, The competition was April 13 at the global headquarters of Lehman Brothers in New York City.     

Now in its 10th year, the FECC is the preeminent interuniversity case rivalry that showcases the business acumen and analytical skills of top graduate business students in the areas of derivative security valuation and financial engineering. A team from the University of Chicago won second place.    

In the contest, teams from seven top B-schools competed against one another — and the clock — as they worked to solve a complex financial engineering problem in just six hours. This year's case, written jointly by Tepper School faculty and Lehman Brothers traders, involved structuring and valuing a barrier option written on realized volatility and dependent on the value of a particular equity index. After the six-hour deadline, the teams presented their recommendations before a panel of judges made up of faculty from the competing schools and Lehman Brothers executives.    

The FECC showcases the role and application of advanced quantitative models and mathematics to real-life business situations, and represents an innovative partnership between the Tepper School and Lehman Brothers to reinforce these techniques in the business school curricula. Widely known for its reputation in quantitative analysis, Carnegie Mellon also offers one of the most highly regarded programs in computational finance, including specialized curriculum at the bachelor's, master's and doctoral levels, as well as a joint degree with the MBA. Graduates of these programs are highly sought-after by the world's leading financial institutions.    

"This competition allows students to put their cutting-edge skills in computational finance and financial engineering to the test," said Kenneth B. Dunn, dean of the Tepper School and professor of finance. "This type of mathematical application is high-impact and among the fastest-growing fields within financial services and many other industries, and there's no better way for students to prepare for the real-world situations they'll face after graduation."     

New entrants to this year's contest were Princeton University and New York University. They joined the University of Pennsylvania, the University of California Berkeley, Columbia University, the University of Chicago and Carnegie Mellon. Sponsors included Lehman Brothers, Appaloosa Asset Management and the PRMIA Institute.