Islamic option is a sale where the buyers deposits money with the seller as a part of payment of the price in advance and agrees if the buyer discontinued the contract, the seller can forfeit the deposit. If the buyer proceed with the contract, the deposit will be deducted from the total price.

Islamic options

increased usage of derivatives for risk-management purposes as positive for Islamic financial institutions, sukuk investors, issuers and sharia-compliant non-financial corporates.

Made in accordance with Shariah.

Future contracts

Islamic swaps (Islamic FX swaps, Islamic Cross Country swaps an Islamic Profit Rate swaps)

Islamic FX forwards (IFF)

Whose market price, value, delivery or payment obligations.

• Is derived from, reference to or based on, but not limited to, Islamic Securities, commodities, assets, rates (including profit rates or exchange rates) or indicates

Any agreement, including an option, a swap, futures or forwanrd contract.

• E.g.: A forward contract to buy coffee at today’s forward price, to be delivered and paid in the next two months.

-Needs a case of double coincidence, timing and quantity

• Very little scope for secondary market trading

Future : -Standardized forwards (Contract size, maturity, place of delivery stated)

• Each party is a price-taker (interacting in the exchange)

-Counterparty risk is transferred to the exchange. The exchange becomes the buyer to the seller, and the seller to the buyer.

-Traders use futures contracts to speculate on the direction of the commodity prices

• Banks and Fis use futures to hedge their porftolio against adverse price fluctuations

need to use went recent volatility in key Islamic finance markets caused by the coronavirus pandemic, oil price fall and cuts in central banks repo rates

Islamic bank's exposure to profit-rate risk alongside mitigants employed to neutralise/hedge and manage those risks through, for example, the use of derivatives

Derivatives play a vital role in hedging and mitigating risks that come from volatilities in profit rates, exchange rates and commodity prices.

Urbun is a partial payment of the price of an asset, which entitles the buyer to the right to buy an asset but does not obligate the buyer to do so.

Ibnu qudamah defined it as “a transaction whereby the buyer buys a commodity and pays a deposit of one dirham or more on the understanding that the deposit will be considered part of the purchase price if the buyer decides to continue with the contract. If the buyer decides to withdraw from the contract, the seller will forfeit the deposit

In the ‘urbun contractual form, buyer pays seller an agreed upon amount (akin to a down payment) in advance of the exchange of an asset.

At the time of exchange, buyer can elect to complete the sale at the previously agreed upon price or leave the transaction incomplete, with the down payment forfeited to seller as a gift.

savings or investment
in which the return is linked to an underlying asset with predefined features such as the maturity date, coupon date, capital protection level (SMR Wealth Management).

The difference being that Islamic structured products adhere to Shariah principles by avoiding riba (usury), gharar (uncertainty), zulm (injustice), and operate holistically in a Shariah-compliant manner

CIMB

• Islamic Structured Products offered by CIMB are investments that can be fully customisable to meet investors’ personalised investment objectives such as principal protected, diversification, leverage, yield enhancement, access to non-traditional asset classes, conversion and amongst others.