The first motivation of the creation of derivatives is hedging risk but unfortunately this motivation has changed over the decades since more conventional contracts are used for speculation. The purpose of this study is to use derivatives solely for hedging while respecting principles of profit and risk sharing. According to previous work about the pricing of Waad Bil Mourabaha and using the conventional expression of the contingent premium option, we will propose a model of Participating CPO.
Digital currencies are unregulated and potentially have a destabilizing effect coupled with increased concerns regarding capital gains and losses in a high volatility environment. When added to an equity portfolio, this currency may have a certain driving factors in terms of return and risks in the case of portfolio diversification. In this study, from the Shari'ah angle, we follow the position of Kahf ( 2017) who explained that Bitcoin is considered "Like any other currency". It has to be used under the "same conditions of exchanging currencies". Therefore, we explore the effect of adding digital currencies to Islamic portfolio by relying on the portfolio theory and comparing the risk and the return of Islamic portfolios with and without digital currencies. The results show that the performance of combined portfolios, of Shari'ah compliant stocks and digital currencies, improves; however, this depends more or less on the increase of the return rather than the reduction of total risk. Specifically, digital currencies may have a big role in bringing high risks with speculative effect in portfolio diversification. In the end, we provide some recommendations to investors to secure their Islamic portfolios if they are combined with digital currencies.
The purpose of this work is to model a participating forward contract permitting to avoid unlimited risk and unknown loss using a formula of risk sharing that includes the payment of an additional amount under specific price variations. This contract offers a new tool that Islamic finance can use since this finance is suspicious of classical forward contracts. The modeling is based on the classical forward equation, which incorporates the profit and loss sharing principle derived from Islamic finance. The participating forward is tested on oil data prices to compare the participating forward contract to the classical one. The participating forward offers a better possibility of profit to the seller and the buyer because of the PLS mechanism which reduces the risk for both parties. The main implication of this modeling is that the participating forward can provide some investors and Islamic banks with an alternative to conventional forward contracts.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.