The process of financial engineering can be viewed as either build-
ing complex instruments utilizing basic building blocks or un-
bundling and repackaging different components of existing financial
instruments with respect to return, price risk, credit risk, country
risk, etc. All of today’s highly liquid instruments and derivatives are
built upon a basic set of instruments. A close examination of the in-
struments underlying the Islamic financial system reveals that they
share many of the features of today’s basic building blocks, and it is
the financial engineer’s task to design and innovate more complex
instruments without violating any of the conditions defined by the
Islamic system.
The process of introducing a new product is subject to the rules
defined by Islamic law (Shariah).7 The process of determining