Challenges Facing Financial Engineering with Islamic Rules

Khalaf Al-Taani

doi:doi:10.11648/j.ijefm.20130105.14

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Challenges Facing Financial Engineering with Islamic Rules

Khalaf Al-Taani

Published in International Journal of Economics, Finance and Management Sciences (Volume 1, Issue 5)

Received: 31 July 2013 Accepted: Published: 20 September 2013

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Abstract

Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage cased by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives .

Published in	International Journal of Economics, Finance and Management Sciences (Volume 1, Issue 5)
DOI	10.11648/j.ijefm.20130105.14
Page(s)	234-240
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Islamic Finance, Financial Engineering, Derivatives

References

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[3]	Ayub, M. (2007). Understanding Islamic finance. Hoboken, NJ: Wiley.
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[5]	Clarke, R., (2009) Islamic Banking, the OECD Observer, Nov 2009.
[6]	Chapra, U. (2009). The global financial crisis: Can Islamic finance help? Retrieved from http://www.newhorizon-islamicbanking.com
[7]	Fagerer, R, Pikiel, M.E. and McMillen, M.J.T., (2010) The 2010 Tahawwut Master Agreement: Paving the Way for Shari'ah-Compliant Hedging. Available at SSRN: http://ssrn.com/abstract=1670118
[8]	Ghoul, W., (2008) Risk Management and Islamic Finance: Never the Twain Shall Meet? Journal of Investing; fall 2008; 17, 3
[9]	Jobst, A. A. (2008), Derivatives in Islamic Finance, in Islamic Capital Markets: Products, Regulation and Development (Ali, S.S. ed), Islamic Development Bank.
[10]	Kamali, M. H. (2005), Fiqhī Issues in Commodity Futures. in Financial Engineering And Islamic Contracts 20-43 (Iqbal, Munawar & Tariqullah Khan, eds.), Palgrave Macmillan.
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APA Style

Khalaf Al-Taani. (2013). Challenges Facing Financial Engineering with Islamic Rules. International Journal of Economics, Finance and Management Sciences, 1(5), 234-240. https://doi.org/10.11648/j.ijefm.20130105.14

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ACS Style

Khalaf Al-Taani. Challenges Facing Financial Engineering with Islamic Rules. Int. J. Econ. Finance Manag. Sci. 2013, 1(5), 234-240. doi: 10.11648/j.ijefm.20130105.14

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AMA Style

Khalaf Al-Taani. Challenges Facing Financial Engineering with Islamic Rules. Int J Econ Finance Manag Sci. 2013;1(5):234-240. doi: 10.11648/j.ijefm.20130105.14

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@article{10.11648/j.ijefm.20130105.14,
  author = {Khalaf Al-Taani},
  title = {Challenges Facing Financial Engineering with Islamic Rules},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {1},
  number = {5},
  pages = {234-240},
  doi = {10.11648/j.ijefm.20130105.14},
  url = {https://doi.org/10.11648/j.ijefm.20130105.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20130105.14},
  abstract = {Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage cased by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives .},
 year = {2013}
}

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TY  - JOUR
T1  - Challenges Facing Financial Engineering with Islamic Rules
AU  - Khalaf Al-Taani
Y1  - 2013/09/20
PY  - 2013
N1  - https://doi.org/10.11648/j.ijefm.20130105.14
DO  - 10.11648/j.ijefm.20130105.14
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JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
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AB  - Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage cased by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives .
VL  - 1
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Author Information

Khalaf Al-Taani

Finance & Banking Dept, Irbid National University, Irbid , Jordan

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APA Style

Khalaf Al-Taani. (2013). Challenges Facing Financial Engineering with Islamic Rules. International Journal of Economics, Finance and Management Sciences, 1(5), 234-240. https://doi.org/10.11648/j.ijefm.20130105.14

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ACS Style

Khalaf Al-Taani. Challenges Facing Financial Engineering with Islamic Rules. Int. J. Econ. Finance Manag. Sci. 2013, 1(5), 234-240. doi: 10.11648/j.ijefm.20130105.14

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AMA Style

Khalaf Al-Taani. Challenges Facing Financial Engineering with Islamic Rules. Int J Econ Finance Manag Sci. 2013;1(5):234-240. doi: 10.11648/j.ijefm.20130105.14

Copy | Download

@article{10.11648/j.ijefm.20130105.14,
  author = {Khalaf Al-Taani},
  title = {Challenges Facing Financial Engineering with Islamic Rules},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {1},
  number = {5},
  pages = {234-240},
  doi = {10.11648/j.ijefm.20130105.14},
  url = {https://doi.org/10.11648/j.ijefm.20130105.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20130105.14},
  abstract = {Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage cased by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives .},
 year = {2013}
}

Copy | Download

TY  - JOUR
T1  - Challenges Facing Financial Engineering with Islamic Rules
AU  - Khalaf Al-Taani
Y1  - 2013/09/20
PY  - 2013
N1  - https://doi.org/10.11648/j.ijefm.20130105.14
DO  - 10.11648/j.ijefm.20130105.14
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 234
EP  - 240
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20130105.14
AB  - Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage cased by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives .
VL  - 1
IS  - 5
ER  -

Copy | Download