Islamic Critique and Alternative to Financial Engineering Issues النقد والبديل الإسلامي لقضايا الهندسة المالية

Masudul Alam Choudhury ()
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Masudul Alam Choudhury: College of Commerce & Economics Sultan Qaboos University & Trisakti University Postgraduate Program in Islamic Economics and Finance

Journal of King Abdulaziz University: Islamic Economics, 2009, vol. 22, issue 2, 205-244

Abstract: The arguments of this paper arise from the economic and methodological premises on behavior, markets and institutional structure that together influence asset-valuation. All these are bonded together to explain how methodology defines the domain of financial engineering in mainstream and Islamic perspectives. Mainstream financial engineering as a study of methods that stand upon the assumptions of behavior, markets and institutions of the neoclassical vintage is critically examined. This is contrasted with the Islamic perspectives of the same issues that outlay an altogether different methodological worldview. Different forms of asset-valuation models emerge in these two cases. The Islamic premise of behavior, markets and institutions is utilized against the backdrop of its most fundamental epistemology. This is the episteme of unity of knowledge (Tawhid). The contrary epistemological foundation of mainstream financial engineering is rationalism and rational economic, scientific, social and institutional choices. Thus the parting conceptions of financial engineering applied to asset-valuation make the mainstream and Islamic approaches distinct and opposite to each other. This paper develops and investigates an overlapping generation asset-valuation model in the Islamic epistemological context while it examines the unacceptable nature of financial engineering ideas in the mainstream case. Financial engineering in both perspectives are analytically examined against there distinct epistemological worldviews. Referees’ comments have been answered in the footnotes of this paper given towards the end. This method of answering referees’ comments leaves the text of the paper intact while allaying the referees’ concerns by detailed explanations. بنيت حجج هذه الورقة على المسلمات الاقتصادية والمنهجية حول السلوك، والأسواق، والتركيب المؤسسي التي تؤثر مجتمعة في قيم الأصول المالية. لقد تم دمج جميع هذه العوامل لتفسير كيف تعمل المنهجية على تحديد مجال الهندسة المالية من المنظور السائد والمنظور الإسلامي. كما تم فحص الهندسة المالية السائدة بشكل دقيق، وكذلك الإسلامية على أساس المنهج وحيدة العلوم أي المنهج التوحيدي.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:abd:kauiea:v:22:y:2009:i:2:no:8:p:205-244

DOI: 10.4197/islec.22-2.8

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