Product Innovations through Financial Engineering

Abstract

Rapid changes in the corporate finance, bank finance and investment finance have changed the scenario of financial markets. With the growing competition, the traditional product portfolios of financial institutions are being replaced with more complex products, which have given birth to a new discipline known as financial engineering. In the fast changing environment, it is being viewed as the lifeblood of financial innovation – the process that seeks to adapt existing financial instruments and processes and to develop new ones so as to enable the financial entities to meet the changing needs of customers and to cope up more effectively with the changing world. Today‟s complex financial products are featured with significant overlapping in terms of benefits and cost associated. To remain relevant in the market place and to win substantial market share, financial institutions must bring innovation in the existing product line through financial engineering. Through this paper, the author would like to throw a light on the concept of financial engineering, motivating factors, need for product innovations through financial engineering and suggest the strategies for the same.