Shedding light on the way the Islamic finance industry conceptualises the role of financial instruments in a market risk management framework that adheres to the objectives of Islamic jurisprudence, Sherif Ayoub explains the issues surrounding the avoidan

Derivatives are few and far between in countries where the compatibility of financial transactions with Islamic law requires the development of shari'ah-compliant structures. Islamic finance is governed by the shari'ah, which bans speculation and gambling, and stipulates that income must be derived as profits from the shared generation of goods and services between counterparties rather than interest or a guaranteed return. The paper explains the fundamental legal principles underpinning Islamic finance with a view towards developing a cohesive theory of derivatives subject to shari'ahprinciples. After critically reviewing accepted contracts and the scholastic debate surrounding existing financial innovation in this area, the paper offers an axiomatic perspective on a principle-based permissibility of derivatives under Islamic law.

Financial Engineering in Islamic Finance the Way Forward: A Case for Islamic Derivatives has been envisioned as a sequel to Contracts and Deals in Islamic Finance: A Users Guide to Cash Flows, Balance Sheets, and Capital Structures. Product development in Islamic finance bas been based upon the usage of various sale and lease contracts and combinations of the same. In our current work, we explore the idea even further and look at structures based on the concept of wad. Islamic banks need to develop structures that behave like options and futures, and the shariah community needs to look closely at issues related to forward sales. In this book, we have explored these avenues, made recommendations, and have hopefully encouraged some dialogue in this area.

The Islamic finance industry faces the challenging task of attempting to reconcile the risk management demands of business entities with the difficulties posed by the seemingly rigid stance taken by some Shari'ah scholars over hedging practices. Offering a fresh perspective, Sherif Ayoub confronts the challenge by reformulating how we might think about the theorisation of economic matters in the Islamic faith. Shedding light on the way the Islamic finance industry conceptualises the role of financial instruments in a market risk management framework that adheres to the objectives of Islamic jurisprudence, readers will come to understand the issues surrounding the avoidance of Riba (usury), Gharar (excessive uncertainty) and Maysir (gambling).

Islamic finance has emerged as a rapidly growing industry with an increasingly global presence, resulting in an average growth by 15 to 20 per cent annually. Even though the industry has expanded in terms of volume and scope, it still represents a small share of total banking assets worldwide. Today, the industry is one of the fastest growing segments and accounts $1.66 trillion to $2.1 trillion controlled by more or less 300 Islamic financial institutions in more than 75 countries. In this regard, it is certainly not surprising that parallel to this explosive growth, market participants can no longer stay behind with hedging their risks they are subject to in the course of their operations. 0Although derivatives have been in existence for centuries and have a widespread use, derivatives as such have no precedents under 'Shari?ah'. The aim of this research is to outline the objections from a 'Shari?ah' perspective towards the use of derivatives in their conventional forms. In addition, it examines a range of 'Shari?ah'-compliant contracts with derivative-like features that may mirror some of the characteristics of their conventional counterparts. 0In 2010, the International Swaps and Derivatives Association (ISDA) in cooperation with the International Islamic Financial Market (IIFM), published the ISDA/IIFM 'Tahawwut' (hedging) Master Agreement. This launch is a significant milestone for the derivatives market, and marks the introduction of the first globally standardized master documentation for documenting privately negotiated 'Shari?ah'-compliant over-the-counter (OTC) derivatives. In this regard, this research explores and analyzes how the ISDA/IIFM 'Tahawwut' (hedging) Master Agreement has been adapted to take the concerns with respect to derivatives away, while providing a standardized master framework that strictly complies with the 'Shari?ah' principles and concepts.

This study addresses derivatives instruments in Islamic finance. It highlights the benefits of these instruments, their legal aspects and the appropriate alternatives. The forward, futures and options contracts in commodity markets are discussed and the arguments in favour of and against these instruments examined. The forward contracts issue includes the possibility of trading gold in forward basis, the forward market for currencies and the possible alternative to manage related risks. With the examination of futures contracts, the main arguments against such a contract are addressed, for example the sale prior to taking possession and the sale of debt hedging and speculation. The study proposes khiyar al-shart and bay al-arbun as tools of risk management and alternatives to options. The sale of pure rights is at the center of the admissibility of options in Islamic law and is investigated comprehensively.

Explore Islamic finance at a deeper level Intermediate Islamic Finance: Theory and Practice fills the gap for students and professionals who are already familiar with the fundamentals of Islamic finance, but would like to gain an enhanced understanding of Islamic finance theories and practices. This comprehensive text provides you with coverage of global developments and describes the role of Islamic finance within the global finance community to guide you in your understanding of this important aspect of the international financial landscape. The book references advance concepts and specific problems in the practice of Islamic finance, provides suggested further readings for each chapter, offers details of advanced analysis, and presents key data in visual form via graphs, figures, and tables. Profound changes have taken place in the financial landscape over the past few decades, including major innovations in financial instruments and substantial changes in regulation. With global financial markets becoming increasingly important players in the industry, it is critical that today's financial professionals understand the essence and implications of key Islamic finance theories and practices. Build upon your fundamental understanding of Islamic finance Explore some areas of convergence and conflict between Islamic finance and conventional finance Strengthen the harmony between Islamic and conventional finance theories and their applications Prepare for a well-rounded career in finance by better understanding how Islamic finance principles apply Intermediate Islamic Finance: Theory and Practice is an essential text for graduate and post-graduate finance students, economists, researchers, bankers, financial regulators, policymakers, and members of the business community who want to develop a deeper understanding of Islamic finance theories and practices.