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Modeling prices of islamic commodity swaption
Other Title(s)
نمذجة أسعار عقود سلع المبادلة الإسلامية
Joint Authors
al-Judaibi, Nahla Ghazi
Hakim, Shubayr Ahmad
Tayashi, Tahir
Source
Journal of King Abdulaziz University : Islamic Economics
Issue
Vol. 31, Issue 2 (31 Jul. 2018), pp.111-131, 21 p.
Publisher
King Abdulaziz University Scientific Publishing Center
Publication Date
2018-07-31
Country of Publication
Saudi Arabia
No. of Pages
21
Main Subjects
Abstract EN
Derivatives that manage commodity risk over multiple periods are not Sharīʿah-compliant.
This study proposes a Sharīʿah-compliant swaption model (waʿdān or two promises on swap) for hedging commodity risk.
The model combines two separate and independent waʿds (waʿdān) on commodity swap through murābaḥah contract.
Black (1976) model is used to determine the intrinsic value for the counter-parties involved in the contract.
The risk-free rate is replaced with the return on AAA ṣukūk to make Black (1976) model Sharīʿah compliant.
The proposed Sharīʿah-compliant model is compared with the conventional swaption model, and with the Islamic commodity option (waʿdān on commodity) for its effectiveness.
The tests of the model show that the proposed Islamic pricing model has a higher positive effect than the conventional swaption model.
In addition, the proposed Islamic commodity swaption is more efficient than Islamic commodity options.
The reliability of the proposed model was established by the Monte Carlo simulation run with 10,000 iterations.
American Psychological Association (APA)
al-Judaibi, Nahla Ghazi& Hakim, Shubayr Ahmad& Tayashi, Tahir. 2018. Modeling prices of islamic commodity swaption. Journal of King Abdulaziz University : Islamic Economics،Vol. 31, no. 2, pp.111-131.
https://search.emarefa.net/detail/BIM-837654
Modern Language Association (MLA)
al-Judaibi, Nahla Ghazi…[et al.]. Modeling prices of islamic commodity swaption. Journal of King Abdulaziz University : Islamic Economics Vol. 31, no. 2 (Jul. 2018), pp.111-131.
https://search.emarefa.net/detail/BIM-837654
American Medical Association (AMA)
al-Judaibi, Nahla Ghazi& Hakim, Shubayr Ahmad& Tayashi, Tahir. Modeling prices of islamic commodity swaption. Journal of King Abdulaziz University : Islamic Economics. 2018. Vol. 31, no. 2, pp.111-131.
https://search.emarefa.net/detail/BIM-837654
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 129
Record ID
BIM-837654