Participating Contingent Premium Options

Abstract

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.

Pricing of Participating Forward Contract

“…According to Rajae and Amina (2017), in the modeling of a contingent participating option (PCPO), the expression of the equation P'(PCPO) which represents the sharing operator under the principle of sharing profits and losses:…”