Why MIT for Financial Technology?

The past two decades have witnessed an unprecedented series of theoretical and empirical advances in our understanding of financial markets. These breakthroughs in financial technology have led to a massive increase in financial products and services that require increasingly sophisticated quantitative tools to properly assess and manage their risks and returns. The Financial Technology Option trains graduate students from across the MIT curriculum to apply the latest financial theories in a variety of broad management contexts. Proper financial management includes methods for the provision of funds via technology along with the allocation or investment of said funds.

Technology at MIT

MIT is world-renowned for its amazing history in the field of technology. Presently the internet is the driving force behind technology research and the speed with which information can be attained. The Laboratory for Computer Science (LCS) at MIT has fundamentally changed the way we do computing. Much of the hardware and software driving the Information Revolution has been, and continues to be, created at LCS.

LCS members and alumni have been instrumental in the development of the ARPANet, the Internet, the Ethernet, the World Wide Web, time-shared computers, RSA encryption, and dozens of other technologies. Anyone who makes decisions using a spreadsheet, sends and receives email, communicates with colleagues through a LAN, or surfs the Web is benefiting from the creative output of a present or former member of LCS.

The Sloan School of Management at MIT was named for benefactor and 1895 MIT graduate, Alfred P. Sloan. As chairman of General Motors, Sloan invented the multidivisional company regarded as the management model for the corporate world. The school has continued on the path set by this brilliant innovator and is committed to developing a close association between science and industry.

Finance Breakthroughs at MIT

The Sloan Finance department has a rich history in analytical finance. There is the Black-Scholes model for options pricing developed by the late Professor Fischer Black and Nobelists Myron Scholes and Robert Merton. When the Black-Scholes formula was published in 1972, it fueled an explosion of activity in derivatives markets. This theory laid the foundation for our current understanding of derivatives and complex financial instruments. When its basic methodology was extended to create other financial instruments, the billion-dollar financial engineering industry was born.

MIT Sloan currently boasts what is arguably the top academic Finance Department in the world. These eminent faculty members continue to push the cutting edge of capital markets research.

1985 Nobel prize winner Franco Modigliani is best-known for his research on capital structure and is famous for the M&M theorem (with Merton Miller). Stew Myers has gained recognition for his research on capital structure. His book Principles of Corporate Finance, written with R.A. Brealey and now in its sixth edition, is the classic textbook on corporate finance. John Cox gained fame for his collaboration on the Theory of Interest Rates. His bond-pricing model is widely used on Wall Street. His book, Options Markets, has long been one of the leading texts in the field. Steve Ross is famous for his Arbitrage Pricing Theory and the Economic Theory of Agency. He is also the co-discoverer of risk-neutral pricing and the binomial model for pricing derivatives. His book, Corporate Finance, is in its fourth edition.