Publication:
An appraisal of shari'ah-compliant commodity options for Islamic banks
Loading...
Abstracts views
14
Views & Download
10
Date
2023
SDG:
Abstract
This paper aims to explore the potential structures of Shari'ah-compliant commodity options that would provide better alternatives for market participants in mitigating the risks associated with economic and commercial transactions. It appraises the current commodity options practiced in the conventional market and puts forward five conceptual alternatives in structuring Shari'ah-compliant commodity options while still retaining the main purpose and benefit of commodity options. Several nominated contracts in classical Islamic literature may be used to replicate certain features of conventional commodity options. The existence of these contracts is also similar to the main purpose of the options where the risk of volatility of the future commodity price is being shared with, reduced or transferred to the third party. Among the concepts are urbun, hāmish jiddiyyah, wa’ad and sale contract such as istijrār, baiʿ al-ikhtiyār, salam and murabahah. Hence, this paper offers novelty in its approach to evaluating the commodity options from Shari’ah perspective, and subsequently, put forward five alternatives that can be practiced by Islamic banks all over the world.
Keywords
Islamic derivatives , Commodity , Options , Urbun , istijrār
Citation
Zaharuddin Abdul Rahman, & Maya Puspa Rahman. (2023). An Appraisal of Shari'ah-Compliant Commodity Options for Islamic Banks. Journal of Islamic Finance, 12(1), 83-95.
Publisher
IIUM Institute of Islamic Banking and Finance (IIiBF)
Files
an_appraisal_shari'ah-sompliant_commodity_options_Islamic_banks_zaharuddin_maya.pdf
Size: 1.91 MBFormat: pdf
Views: 4 Downloads: 6
Link Entity
Person Search Results
1 - 1 of 1