Innovating Finance Education:

Anticipating and driving What comes Next

Assistant Professor Peter Mueller, Ph.D., teaches the Financial Management course, an introductory class that is a requirement for all Gabelli School undergraduates. To introduce students to computer coding, he typically assigns them to write a finance-related program using Python or R, two popular computer languages used in machine-learning applications. Recent assignments involved creating programs to calculate the present value of projected future cash flows and to scrape financial data from the internet.

“The days when you could get a job out of undergraduate school that paid hundreds of thousands of dollars a year just because you were good at Excel are gone,” said Mueller. “The purpose of my assignments is to get students comfortable with the programming language. I like to stress that being able to handle these new technologies and manage complex data is where they can really gain a competitive advantage over others entering the job market.”

Over a short period of time, the role of AI has evolved from a more rudimentary tool to an accepted method of financial analysis. Hovakimian noted that not only is AI being used more widely in finance, it also is being used in new ways. At first, AI handled classic back-office functions such as data processing and fraud monitoring. Lately, however, the technology is playing an increasingly important role at the core of financial decision-making. For instance, BlackRock’s Aladdin platform uses AI to optimize portfolios and manage risk, and LOXM, JPMorgan’s AI-powered trade execution platform, buys and sells equities more efficiently than human traders. At the individual level, so-called robo-advisors have proven popular, especially with millennials and Gen Z, using AI to provide personalized, less costly financial guidance.

“Artificial intelligence and machine learning models are no longer used for just crunching numbers,” she asserted. “They are used for real decision-making.”

AI also is proving useful to the financial industry in another, perhaps even more surprising way, noted Associate Professor Lin Tong, Ph.D., who teaches financial modeling for undergraduates and fund trading strategies for graduate students. It is being leveraged to convert what might be called analog data into numbers. Before the rise of AI, institutional investment firms might have sent analysts into the field to check on a business’s performance: Does a hotel chain’s reported occupancy rate square with how many lights are on in one of its hotel’s windows at night? Do the number of cars in a big-box store lot support the company’s sales projections? Now, however, much of that on-the-ground intelligence can be gleaned from commercially available satellite images. Machine learning programs can quickly analyze those images and provide a numeric count. They also can rapidly scan breaking news reports about companies for positive or negative words to determine whether the news is good or bad.

“AI can really help to convert nontraditional data into numerical data,” said Tong, whose research interests include AI applications in high-frequency trading and asset management. “You can efficiently convert that nonnumerical data into some tradable information very fast, into something that asset managers can directly input into their models.”

Tong added that as the use of AI increases and is adopted for new applications, the Gabelli School’s Finance and Business Economics Area has responded by offering courses that cover nearly every aspect of AI applications in finance, ranging from Fintech and Machine Learning in Finance to Algorithmic and Automated Trading Systems.

Apart from AI components and in addition to its rigorous core courses, elective courses across the finance curricula play an important role in ensuring programs remain agile and students stay abreast of wide-ranging industry developments. At the undergraduate level, electives make up concentrations in Alternative Investments, Credit, Equity Analysis, Finance, Fintech, Global Finance and Business Economics, and Investment and Value Investing, and provide opportunities for students to build expertise in new, emerging, and growing sectors. Elective courses also are the centerpiece of the specialized tracks in the M.S. in Finance, which range across Finance/Investment, Financial Analytics, Investment Banking, Fintech, ESG, Alternative Investments, and Credit. Each provides the knowledge and skill sets to differentiate students in the competitive marketplace.

“We constantly revise, renew, refresh, and change the set of electives that we offer,” Hovakimian said. “That’s where the flexibility comes in, because technical knowledge becomes obsolete very fast, and finance is being driven in new directions by that continuous change.”

One of the more recent additions to the finance portfolio is an undergraduate concentration in alternative investments. The five courses it comprises reflect how the landscape of investments available to all investors has shifted in recent years to include not just traditional, publicly traded stocks and bonds, but also a diverse range of alternative investments, including hedge funds, private equity, venture capital, and real estate as well as exotic alternative investments such as art and collectables. Graduate courses on alternative investments, commodities, and venture capital also are being offered. The Gabelli School is one of the few comprehensive undergraduate programs that offer alternative investment course content in the United States, according to Clinical Professor Kevin Mirabile, who directs the concentration.

“This is part of the Gabelli School architecture that emphasizes applied learning,” he said. “I think one of the things that differentiates us is that we have all of these similar but equally important concentrations, which students can choose from.”

According to Mirabile, the growing popularity and availability of alternative investments dates back to the 2008 financial crisis, when many of these investments did not devalue as much as traditional investments, and in some cases, even appreciated in value. That made them useful as a means of limiting a portfolio’s downside risk. Since then, there has been a large-scale shift in asset allocation to alternative investments across a wide range of institutions—from endowments to pension funds and sovereign wealth funds.

“In the last five years, we’ve seen an expansion of products that use alternative investment strategies that are available to retail investors,” he explained. “What were once considered boutique or specialty investments have now really gone mainstream.”

As the alternative investment market has grown, so has the number of people working in it—including Gabelli School alumni. Mirabile actively taps alumni and other industry experts to teach classes as adjuncts or to serve as guest lecturers.

“I believe the best person to talk about what’s happening in the industry is someone who works in the industry,” Mirabile said. “I provide the academic framework to understand and evaluate what’s happening, but I bring in practitioners to tell us about what they’re doing day-to-day.”

In addition, the alternative investment concentration has close ties to the student-run alternative investment club, which is open to all Gabelli School students and typically has 100 to 200 members. Students meet to learn about the various types of alternative investments, hear presentations by industry experts, and even visit hedge funds; private equity; and other alternative finance firms in New York City. All of these opportunities provide a solid foundation for pursuing careers across a variety of finance-related fields.

“Students have had a lot of success in finding jobs in wealth management, asset management, and in alternative-investment firms themselves. And historically, that was not an area where we had placed as many students as we do today,” Mirabile asserted.

As with Gabelli School faculty in other areas, the Finance and Business Economics faculty stay up to date on developments through their own research, which plays an instrumental role in advancing the industry and also serves to continually invigorate course content. For example, Mueller, who teaches several sections of the Financial Management course, focuses his research on the cutting-edge world of blockchain–decentralized digital ledgers shared across a network of computers. Blockchain is the underlying technology of cryptocurrencies, such as Bitcoin and Ethereum. He is particularly intrigued by the potential for blockchain technology to complement traditional financial markets—or even replace them, with the potential to lower the cost of doing business.

“There is an argument that traditional intermediaries have too much market power,” Mueller stated. “This is a highly regulated environment with many barriers to entry. With enough market power, a big bank can push loan rates above where they’d land in a truly competitive market.”

Open-source platforms such as Ethereum that are compatible with smart contracts—self-executing programs on the blockchain that automatically enforce the terms of an agreement—have resulted in decentralized finance (DeFi) applications, creating a financial system in which lending and trading can be done without relying on traditional intermediaries such as banks.

“Blockchain and DeFi allow for trustless execution of transactions,” Mueller contended. “In traditional markets, you need to trust an intermediary. The Securities and Exchange Commission spends billions of dollars to create and enforce its rules. Intermediaries spend billions of dollars to comply with those rules. Yet intermediaries still sometimes collapse, failing to live up to our expectations of trust. An argument for blockchain, then, is that we pay too much for trust in traditional markets. The blockchain mitigates the need for that regulation to a certain extent by facilitating trustless execution.”

While Finance and Business Economics faculty members incorporate the latest developments into their courses and delve deeply into some of the most fundamental financial questions through their research, Hovakimian stresses that the foundational courses in the subject remain as important as ever, if not more so. They ensure that students have not only the knowledge they need, but also an ethical grounding about using new technologies and navigating the myriad changes occurring within the industry. In the competitive world of finance, the pressure to succeed is greater than ever before, yet the need to balance profit with purpose also has never been more critical. Teaching students to understand that what is right and what is profitable are not always the same; building their core values and ensuring they grasp the fact that the decisions they make will impact not only themselves, but other individuals, clients, and the markets; and providing them with ethical guardrails that help to build ingrained codes of conduct and define clear references for accountability, are all part of the comprehensive finance education the Gabelli School delivers—one that instills a progressive mindset while emphasizing the importance of leading and investing responsibly.