THE IIFM ISLAMIC HEDGING MASTER AGREEMENT: A SHARIAH PERSPECTIVE (ISRA-TR REPORT 2016)

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Author: Ijlal Alvi
Year: 2016


The ISDA/IIFM Tahawwut Master Agreement was designed to facilitate the risk management function of Islamic financial institutions. It is seen as the backbone for Islamic hedging products and documentation and has contributed to an increased understanding of Islamic hedging product structuring and its risk mitigation objectives, at the same time boosting product acceptability at the global level.

The Islamic financial services industry has expanded its reach and appeal to many countries across the globe. Islamic financial transactions now take place in a number of currencies, some of which are volatile due to fast-changing global markets. In addition, the rate of return on assets and liabilities is also subject to volatility, as they could be on a fixed or floating basis. Since it is practically not possible to mitigate currency and the rate of return risk through takaful, in 2006 the International Islamic Financial Markets (IIFM) in association with the International Swaps and Derivatives Association (ISDA), embarked on the challenging task of developing an Islamic hedging (tahawwut) standard master agreement, product confirmations and related credit documentation.

 

Source:

ISRA THOMSON REUTERS ISLAMIC COMMERCIAL LAW REPORT 2016 (Pg 117 - 121)


 

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