Shariah parameters on the Islamic foreign exchange swap as a hedging mechanism in Islamic finance
Author
Source
ISRA International Journal of Islamic Finance
Issue
Vol. 1, Issue 1 (31 Dec. 2009), pp.77-99, 23 p.
Publisher
International Shari'ah Research Academy for Islamic Finance
Publication Date
2009-12-31
Country of Publication
Malaysia
No. of Pages
23
Main Subjects
Economy and Commerce
Financial and Accounting Sciences
Religion
Law
Islamic Studies
Topics
- Islamic jurisprudence
- Islamic law
- Islam
- Financial transactions
- Management
- Contracts
- Financing
- Foreign exchange
- Tawarruq
- Hedge(Finance)
- Maqasid al-Shari'ah
- Financial risk
Abstract EN
The Islamic Foreign Exchange Swap (hereafter Islamic FX Swap) is a contract that is designed as a hedging mechanism to minimise market participants’ exposure to market currency exchange rates which are volatile and fluctuating.
Although an Islamic FX Swap functions in almost the same way as its conventional counterpart, its structure must not contravene the principles of Shariah.
In other words, an Islamic FX Swap structure should be free from any elements prohibited by Islam such as usury (riba), gambling (maysir) and excessive ambiguity (gharar).
These prohibitions are mainly to promote justice and provide a level playing field in order to protect the interests of and circumvent harm to all parties involved in market transactions, which is in line with the objectives of Shariah (maqasid al-Shariah).
This paper therefore aims to review the structure and mechanism of the Islamic FX Swap as currently offered by many Islamic financial institutions worldwide.
Specifically, this paper highlights the Shariah parameters and guidelines in structuring an Islamic FX Swap.
As will be evident in this paper, this instrument has its own advantages as a risk management tool which appeals to Islamic financial institutions as an instrument to hedge against currency exchange market rate volatility.
American Psychological Association (APA)
Dasuqi, Wajdi Asyraf. 2009. Shariah parameters on the Islamic foreign exchange swap as a hedging mechanism in Islamic finance. ISRA International Journal of Islamic Finance،Vol. 1, no. 1, pp.77-99.
https://search.emarefa.net/detail/BIM-717750
Modern Language Association (MLA)
Dasuqi, Wajdi Asyraf. Shariah parameters on the Islamic foreign exchange swap as a hedging mechanism in Islamic finance. ISRA International Journal of Islamic Finance Vol. 1, no. 1 (Dec. 2009), pp.77-99.
https://search.emarefa.net/detail/BIM-717750
American Medical Association (AMA)
Dasuqi, Wajdi Asyraf. Shariah parameters on the Islamic foreign exchange swap as a hedging mechanism in Islamic finance. ISRA International Journal of Islamic Finance. 2009. Vol. 1, no. 1, pp.77-99.
https://search.emarefa.net/detail/BIM-717750
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 97-99
Record ID
BIM-717750