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Financial engineering in Islamic finance
Author(s) -
Iqbal Zamir
Publication year - 1999
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.4270410414
Subject(s) - securitization , financial engineering , islamic finance , swap (finance) , sukuk , islam , structured finance , financial instrument , economics , database transaction , finance , financial market , scope (computer science) , market liquidity , business , construct (python library) , financial innovation , accounting , financial crisis , computer science , philosophy , theology , macroeconomics , programming language
The objective of this article is to examine the scope of financial innovation and engineering within an Islamic financial system. The article concludes that, contrary to common belief, Islamic finance provides the basic building blocks that can be used to construct more complex instruments that will enhance liquidity and offer risk management tools. With the introduction of asset securitization and swap transactions conforming to Islamic principles, the issues of secondary markets and risk management can be addressed. The first section discusses the significance of innovation in Islamic financial markets. The second section discusses the process of introducing new products in the market and their scope. The third section illustrates an Islamic form of asset securitization as an example of financial engineering. The fourth section evaluates the structure of a commodity swap transaction to determine its validity. And finally, the fifth section concludes the discussion. © 1999 John Wiley & Sons, Inc.