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Post by Sapphire Capital on Sept 8, 2008 10:48:11 GMT 4
Islamic Hedging: Gambling or Risk Management? Saadiah Mohamad Universiti Teknologi MARA August 27, 2008 Abstract: Although there is a lack of consensus regarding derivatives and the development of sharia-compliant funds to mimic hedge funds in order to tap the global surplus liquidity especially the Gulf petrodollar, sharia scholars are generally agreeable that hedging is permissible and necessary as a risk management tool. However, there is still considerable debate regarding the kind of instruments that could be sharia-compliant. This paper looks at the main forms of hedging and examines the debate surrounding the use of derivatives in Islamic financial markets. The paper then looks at alternatives for sharia-compliant hedging mechanisms and in particular examines an Islamic financial derivative of Bai Salam that can mimic a short sale in a conventional option, but with potential for becoming a more superior risk management tool. papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1260110_code517200.pdf?abstractid=1260110&mirid=3
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