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Islamic Banking and Financial CrisisReputation, Stability and Risks$
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Habib Ahmed, Mehmet Asutay, and Rodney Wilson

Print publication date: 2013

Print ISBN-13: 9780748647613

Published to University Press Scholarship Online: May 2014

DOI: 10.3366/edinburgh/9780748647613.001.0001

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date: 27 May 2020

Risk Management and Islamic Forward Contracts

Risk Management and Islamic Forward Contracts

Chapter:
(p.136) 8 Risk Management and Islamic Forward Contracts
Source:
Islamic Banking and Financial Crisis
Author(s):

Sherin Binti Kunhibava

Publisher:
Edinburgh University Press
DOI:10.3366/edinburgh/9780748647613.003.0008

This chapter focuses on risk management and the use of forward contracts in Islamic banks worldwide. It looks at contracts that are currently used in Islamic banks, including bai muajjal and wa’d as well as bai al-sarf for currency exchange. The chapter first examines risk in Islamic finance and explains forward contracts as used in conventional finance. It then discusses the problems with conventional forwards from Sharī’ah’s perspective. It also considers the practice of Islamic derivatives and the need for hedging. It stresses the need for more transparency and clarity regarding the usage of Islamic derivatives.

Keywords:   risk management, forward contracts, Islamic banks, bai muajjal, bai al-sarf, currency exchange, finance, Sharī’ah, derivatives, hedging

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