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For similar reasons, several scholars also consider options in violation of Islamic law. Options redress the contingency risk of definite asset delivery (and the associated exposure to discretionary nonperformance) in forward and futures in return for the payment of an upfront, nonrefundable premium. Holders of a call (put) option (promisees) acquire from the seller (promissor) the right (but not the obligation) to acquire (sell) the underlying asset at a predetermined price during a specific period of time. Therefore, options do not only serve to hedge adverse price movements and take advantage of favorable price movements at low transaction cost, but they also cater for contingencies regarding the delivery or receipt of the asset. Usmani (1999) observes that according to the principle of the shariah, an option is a
However, it is worth noting that under the rules of sarf, the concept of al-muqasah allows the settlement of debts in different currencies between two parties.
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