| By: |
Bengana, Mohamed;
Khouildi, Mohamed Yassine |
| Abstract: |
Purpose: As Islamic finance is growing there is a need for more innovative
instruments to be used especially for risk management purposes. The main
purpose of this paper is to analyze “option” as derivative instrument form
conventional point of view, and to analyze it from Islamic perspective. Also
the paper aims to replace the prohibited elements in option by alternative
Islamic contracts. Design/Methodology: The methodology used in this paper is
qualitative method in which it uses a combination of historical research and
literature review based on some previously published articles and reports and
library research. Findings: The study finds out the diverged shariah opinions
about the impressibility of “option” as a derivative instrument, rather than
this the paper found various permissible Islamic contracts that can be used as
alternative. The first alternative is the usage of simple Waad (promise) with
a fee, the second contract is a combination of Waad, Wakalah, and commodity
Murabaha. The third alternative is the usage of Urbun (earnest money) as an
Islamic alternative to call option as well as hamish al jediya. Furthermore
the paper highlights the need of such instruments for hedging purposes rather
than speculation. Originality/Value: The significance of this study is the way
the topic was treated. A lot of previous research papers have identified the
prohibited elements of options and the Islamic alternatives, but this paper
tries to facilitate the understanding of options from Islamic perspective by
using diagrams. Also this paper clarifies the main alternatives and compares
the classical and the contemporary shariah scholars’ views. |
| Keywords: |
Keywords: Options, Waad, Urbun, derivatives, hedging |
| JEL: |
G23 |
| Date: |
2018–02–12 |
| URL: |
http://d.repec.org/n?u=RePEc:pra:mprapa:84499&r=isf |