Pricing of Waad Bil Mourabaha
Keywords:Islamic Finance, Shariah Compliance, Derivatives, Call Op- tion, Black and Scholes Model, risks, hedging
AbstractConventional contracts are limited in the point of view of ethics .To meet the need of increasing nancial market, we use engineeringwhile respecting the principles of the Islamic Shariah1, which containsthe golden rules of ethics.In this article we will model an alternative to the derivatives: especiallythe Call Option using the Waad. Waad is a promise of sale or pur-chase of goods, declared in a unilateral way. In spite of the unusualuse of the Waad's contract because of the disagreement between someschools of islamic law, this contract allows us to propose sophisticatedand interesting contract: Waad Bil Mourabaha.Mourabaha is a Kind of sale where the seller expressly mentions thecost he has incurred on goods for sale and sells it to another person byadding some prot or mark-up thereon which is known to the buyer.Waad Bil Mourabaha's contract provides the right to buy goods ata future date with a contract Mourabaha, but we can't sell this con-tract. Waad Bil Mourabaha can also be used to limit the risk; inthis paper we will study the possibility of Islamic hedging.For the pricing of this contract, we will use the Black and Scholes modeland the approach proposed by A.Jobst, according to S.Oumrana,R.Aboulaich and S.Bouarfaoui we will propose a new approachusing a dynamic return rate of goods.
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