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Chapter Summary

The study on derivatives instruments shows that the admission of derivatives contracts in Islamic finance depends fundamentally on the type of contract used, the subject matter of the contract and the way they are traded. It is submitted in this study that the forward, futures and options contracts in currencies, interest rate and stock indices are not permissible in Islamic law due to the clear involvement of ribā or excessive risk which is a form of gharar. Since the derivatives instruments are just the fundamental forms of derivatives available in the international market and considering the fact that it is possible to create an infinite variety form of derivatives instruments the study attempts to advance some of the Islamic contracts with derivatives potential for future consideration.

Keywords: derivatives contracts; forward contracts; futures contracts; international market; Islamic finance; options contracts

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