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sir there was a question in acca study hub
is the use of derivative permitted in islamic finance
the answer was that the use of derivative is permitted for hedging
but sir the use of derivative includes the short position also(like in currency futures), then how is it allowed?In Islamic finance, the use of derivatives is permitted for hedging purposes. Derivatives, such as currency futures, can be used to hedge against foreign currency risk.
However, it’s important to note that Islamic finance principles prohibit the use of derivatives for speculative purposes or engaging in activities that involve excessive uncertainty or gambling.
The permissibility of derivatives in Islamic finance is based on their use as risk management tools rather than for speculative trading.
Short positions in derivatives, including currency futures, can be allowed as long as they are used for legitimate hedging purposes and comply with Islamic finance principles.
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