Revisiting of an Islamic Options Permisibility from Shariah Perspectives
DOI:
https://doi.org/10.14421/grieb.2014.013-02Keywords:
Options, Islamic Finance, Conventional Finance, Risk ManagementAbstract
The popularity of derivative instruments especially in managing uncertainty (risk)had become popular after several financial crises that occurred since the Great EconomicDepression. There are various tools have been developed in managing risk such as the Options,Forwards, Futures and Swaps. In addition, these kinds of tools are commonly used by institutional and individual investors. Given this popularity, conventional risk management strategies is completely against from Islamic risk management as Islamic financial market arekeep on growing drastically at Cumulative Average Growth Rate (CAGR) of 15% on yearlybasis (Mckinsey, 2005). This is clearly shows that, Islamic finance development are in line withconventional financial development. Therefore, there is need to maintain consistency in productstructures offered by these two financial markets. The complexity is mainly contributed by thestructures and the design of the products especially on Islamic derivatives tools. Therefore, to get a significant picture of the Islamic risk management tools, this paper will only examines thecontemporary derivative instruments namely; Option and the Islamic viewpoints of thisinstrument . As we know, Islamic finance is governed by Shariah principle and guidelines whichprohibit Riba, Gharar, and Masir etc. Therefore, this paper attempts to explore the validity ofoptions from Islamic and Shariah perspectives by reviewing Islamic scholars opinions on anoptions market.
Downloads
References
Al Suwailem, S. (2006). Hedging in Islamic Finance. Occasional Paper (10), Islamic
Development Bank: Jeddah.
Aggarwal, R. K., & Yousef, T. (2000). Islamic banks and investment financing. Journal of
Money, Credit and Banking, Vol. 32(1), 93–120.
Bacha, O. I. (1999). Derivative Instruments and Islamic Finance: Some Thoughts for a
Reconsideration. Internationa l Journa l of Islamic Services, Vol. 1, No. 1., 9-25.
Bacha, O. I. (2010). Financial Derivatives: Markets and Applications in Malaysia. McGraw
Hill. 3rd Edition.
Chance, D. M. (2004). An Introduction to Derivatives and Risk Management, 6th Edition. Ohio: Thompson Learning.
Elahi, Y., & Aziz, M. I. (2011). Islamic Options (al-Khiyarat); Challenges and Opportunities.
International Conference on Information and Finance, IPEDR, Vol.21, 101-104.
Greenspan A. (1999, March). Financial Derivatives. Future Industry Association.
Jobst, A. A., & Solé, J. (2012). Operative Principles of Islamic Derivatives – Towards a
Coherent Theory. IMF Working Paper (WP/12/63), 1-33.
Jordan, M., & Dolvin. (2012). Fundamental of Invesments : Valuation and Invesment. McGraw
Hill. 6th Edition.
Kamali, M. H. (1997). Istihsan (Juristic Preference) and its Application to Contemporary
Issues. Jeddah: Islamic Research and Training institute (IRTI).
Mckinsey. (2005). Capturing The Trillion Dollar Opportunity. The World Islamic Banking
Competitiveness Report 2007-08.
Obaidullah, M. (1998). Financial Engineering with Islamic Options. Islamic Economic Studies, Vol. 6, No. 1.
Obaidullah, M. (2002). Islamic Risk Management : Towards Greater Ethics and Efficiency.
Bhubaneswar: Xavier Institute of Management.
Raysuni, A. (1993). Nadhariyat al Maqashid `inda Al Imam Shatibi. Herndon, Virginia: International Institute of Islamic Thought.
Smolarski, J., Schapek, M., & Tahir, M. I. (2006). Permissibility and Use of Options for
Hedging Purposes in Islamic Finance. Wiley InterScience, 425-443.
Usmani, M. M. (1999). What Shari’ah Experts Say: Futures, Options and Swaps. International
Journal of Islamic Financial Services, Vol. 1, No. 1.
Vogel, F. E., & Hayes, S. L. (1998). Islamic Law and Finance: Religion, Risk, and Return. The
Netherlands: Kluwer Law International.
Zaher, T. S., & Hassan, M. K. (2001). A Comparative Literature Survey of Islamic Finance and
Banking. Journal of Financial Markets, Institutions & Instruments, Vol 10. Issue 4., 155-
Downloads
Published
Issue
Section
License
Global Review of Islamic Economics and Business is licensed under a
Creative Commons Attribution-ShareAlike 4.0 International License