Islamic Forex and the Prohibition of Gharar

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Islamic Forex and the Prohibition of Gharar

Postby » Tue Mar 15, 2016 7:59 am

Read part one of this series here.

The existence of excessive gharar, the Islamic concept of uncertainty and risk, in most forms of forex futures, forwards, options, and swaps probably makes these transactions impermissible according to the Shari’a.

Transactions with Gharar and Why the Prohibition?

In Islamic finance, transactions that involve excessive risk are forbidden. Gharar refers to the uncertainty or hazard, caused by the lack of clarity with the price in a contract or exchange. The literal translation of “gharar” is “trick”. A definition of Gharar is:

[Gharar is] the sale of probable items whose existence or characteristics are ... (read more)

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