"I was attending a wedding a week ago up in New York, and everyone there seemed to be investment bankers except myself. And we were sitting around a table having dinner and talking about what I should say to this group about financial engineering, and basically the bottom line was that all that's being done in financial engineering is taking the things you're already familiar with and repackaging them in ways that might make more sense for your investment objectives. At the same time, there is a downside to it that they discussed, which we'll get to. So if you think of the analogy that was used by Smith & Smithson - that financial engineering is like taking a box of Legos -you all have these building block pieces, and by selecting appropriate boxes and assembling them in creative ways, a financial engineer can create structured securities that meet the particular needs of investors. And the financial engineer structures range from pretty to pretty ugly. The ugliest ones can be unloaded if their yield is high enough. And of course, you usually unload them to an insurance company. You have the residual tranche which is the stuff that is really out there and very difficult to price, but there's always someone who will take it if it has a high enough yield."

From:
"2000 CONFERENCE OF CONSULTING ACTUARIES ANNUAL MEETING"