Derivatives in Islamic finance : examining the market risk management framework / Sherif Ayoub ; series editor Rodney Wilson.

Format:

Book

Author/Creator:

Ayoub, Sherif, author.

Contributor:

Wilson, Rodney.

Series:

Edinburgh guides to Islamic finance

Language:

English

Subjects (All):

Financial risk management--Islamic countries.

Financial risk management.

Islamic countries.

Physical Description:

x, 260 pages ; 22 cm.

Place of Publication:

Edinburgh : Edinburgh University Press, [2014]

Summary:

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, this book confronts the challenge by reformulating how we might think about the theorisation of economic matters in the Islamic faith. It also considers the associated perceptions of permissibility that have until now been confined to the legal sphere, with a focus on contractual elements. The author sheds light on the way the Islamic finance industry conceptualises the role of financial instruments. Paying particular attention to derivatives in a market risk management framework that adheres to the objectives of Islamic jurisprudence, he explores issues such as the avoidance of Riba (usury), Gharar (excessive uncertainty) and Maysir (gambling). Key Features, Scrutinises the rationate and basis of Sharr'ah Resolutions and Standards set by various bodies in the Islamic finance industry prohibiting the use of derivate hedging instruments, Uses economic theory and actual market practices to show the benetta of the contemporary risk management framework, Introduces new topics that are relevant to the discussion, including the conceptualisation of money, gambling and financial intermediaries.

Sherif Ayoub works at Islamic Development Bank with an advisory responsibility over treasury, investments, and the development of the Islamic finance industry. He acquired his PhD from the University of Edinburgh having been previously educated at Columbia University and Baldwin Wallace University. He has also served as a Visiting Fellow at Harvard University and a Visiting Scholar at INCEIF and IFSB. Book jacket.

Contents:

1 Introduction 1

2 Truth formation in Mua amalat 7

2.0 Introduction 7

1.0 The path to the truth: the role of Maslaha, Qiyas and Igma'a 8

2.0 Truth-seeking in the scripture: the reality imposed by critical rationalism and hermeneutics 16

2.1 Conclusion 28

3 Market risks and their management 31

3.0 Introduction 31

3.1 Risk and its management 32

3.2 Risk identification 35

3.3 Risk measurement 44

3.4 Risk strategy 47

3.5 Rationale for hedging 59

3.6 Conclusion 62

4 Conventional derivatives: theory and practice 67

4.0 Introduction 67

4.1 Economics of derivatives 67

4.2 Conventional derivative instruments 77

4.3 Conclusion 94

5 Derivatives in Islamic finance 97

5.0 Introduction 97

5.1 Resolutions by standard-setting bodies in Islamic jurisprudence 98

5.2 Theoretical Shan ah issues 106

5.3 Contractual Shan ah issues 115

5.4 Contemporary derivatives in Islamic finance 115

5.5 Conclusion 137

6 Permissibility of the underlying variables and the recognition of the contract 143

6.0 Introduction 143

6.1 Permissibility of the underlying variables: interest rate benchmarks 145

6.2 Permissibility of the underlying variables: currency benchmarks 155

6.3 The nature of money in Islam 161

6.4 Recognition of the derivative contract 174

6.5 Conclusion 182

7 Maysir, hedging and derivatives 187

7.0 Introduction 187

7.1 A conceptualisation of Maysir in Islamic and Western thought 188

7.2 Maysir, Gharar and the indeterminacy of the zero-sum prohibition 197

7.3 Investment, speculation and gambling: the environment of risk management 207

7.4 The role of financial intermediaries as speculators 212

7.5 Conclusion 218

8 Conclusion 223.

Notes:

Includes bibliographical references and index.

ISBN:

9780748695706

0748695702

OCLC:

870290907