DERIVATIVE INSTRUMENTS: PRODUCTS AND APPLICATIONS

Obiyathulla Ismath Bacha, Ali Zhang Hengchao and Mirzet Šeho

Chapter 10 in Islamic Capital Markets:A Comparative Approach, 2025, pp 275-311 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter is designed to provide an introduction to derivative instruments, their trading systems, and applications. The four main derivative products, forwards, futures, options, and swaps, are described in detail, and their uses are explained. The pricing of options using the Black–Scholes model is explored. The application of derivatives in hedging, risk management, and speculating is examined. On completing this chapter, you should have a good understanding of derivative instruments, their application in risk management, and their trading methods/markets.

Keywords: Islamic Banking; Islamic Finance; Capital; Capital Markets; Contracts; Instrument Design; Interbank; Interbank Money Market; Islamic Interbank Money Market; Bond; Bond Market; Sukuk; Sukuk Market; Common Stocks; Equity Markets; Islamic Equities Market; Derivative Instruments; Shariah; Shariah-compliant Derivative Instrument; Exchange Rates; Foreign Exchange Market; Digital Financial Assets; Blockchain; Financial Solution; Digital Financial Solution; Conventional Capital Market; Dual Market (search for similar items in EconPapers)
JEL-codes: F3 G15 G18 G23 G24 (search for similar items in EconPapers)
Date: 2025
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