Financial engineering attempts to solve problems through innovative financial products and strategies. One product that’s gained notoriety is the mortgage-backed security (MBS), which played a significant role in the 2007–08 financial crisis and helped give financial engineering a bad name.
Depending on whom you ask, financial engineering is either a profession on the cutting edge of innovation or one that can create conditions for market chaos. And the truth is, it’s probably both. But financial engineering doesn’t have to be a dirty phrase.
