Financial derivatives: some thoughts for reconsideration

This paper examines contemporary derivative instruments and the Islamic viewpoint of the new instruments. The validity and permissibility of these instruments appears to vary by scholar: Even where Islamic scholars have found them to be objectionable their reasons for objection differs. Much of the work by Islamic scholars has been of a highly juridical nature. They examine derivatives within narrow confines of contractual arrangements and thereby miss the broader picture of why instruments like futures and options are needed in modern business environments. This paper analyzes forwards, futures and options, examines the evolution of these instruments, their unique benefits and makes a case for why they are needed. Islamic Finance Instruments with derivative like features such as the Bai Salam and Istijrar contracts are also examined. Some of the key concerns that Islamic scholars have regarding derivatives are addressed. _x000D_ (Abstract provided by journal/author; www.islamic-finance.net)