UJIAN TENGAH SEMESTER

TUGAS
: RESPON PAPER
JUDUL
: HADGING IN ISLAMIC FINANCE
KARYA
: SAMI SUWAILEEM
KELOMPOK : 1 /2 / 3 DST
NAMA
:
1. .
2. .
3. ..

CONTENTS
Forward

ix

Abstract

xi

KELOMPOK 1
I. Introduction

13

Risk Dilemma ...................................................................................................... 14

Message ofIslamic Finance .................................................................................. 15
Objective ofthe Paper........................................................................................... 15
Organization ofthe Paper ..................................................................................... 16
Note on References ............................................................................................. 17
Acknowledgement ............................................................................................... 17
II. State of Risk: Volatilities of Financial Markets

19

Stock Markets ...................................................................................................... 19

Commodities Markets ................................................................................................................ 22
Currencies Markets .............................................................................................. 24
Stability ofFinancial Markets ................................................................................. 25

KELOMPOK 2
I I I . Derivatives

27

Structure ofDerivatives ......................................................................................... 27

Size ofDerivatives Market..................................................................................... 28
Futures ................................................................................................................ 30
Options........................................................................................................................................... 31
Strugglefor Legitimacy .............................................................................................................. 32
Economic Debate ................................................................................................ 35
Derivatives and Risk ............................................................................................ 36

KELOMPOK 3
Willingness vs. Ability to Take Risks ..................................................................... 37
Commoditizing Risk ............................................................................................. 39
Artificial Risks ...................................................................................................... 40
Severance ofRisk ........................................................................................................................ 41
Risk and Time ......................................................................................................... 42
Market Distribution .................................................................................................. 42
Law ofLarge Numbers ............................................................................................. 44

KELOMPOK 4
Systemic Risk ......................................................................................................... 45
The Two Edges ofDerivatives .................................................................................. 47

Limits to Derivatives Protection ............................................................................... 48

Who Ultimatley Bears the Risk? ............................................................................... 50
Winner and Losers in Derivatives............................................................................. 51
Risk Dilemma.......................................................................................................... 52

KELOMPOK 5
IV. The Islamic Approach

55

Risk in Islamic Economics..................................................................................... 56

Hedging ............................................................................................................... 57
Tolerable Risk ...................................................................................................... 58
Inevitability ofRisk................................................................................................. 58
Causality ............................................................................................................. 60
Investment vs. Gambling ....................................................................................... 61
Choice under Uncertainty ...................................................................................... 62
A Causal Decision Rule......................................................................................... 63
Statistical Measure ................................................................................................ 65
Derivatives ........................................................................................................... 67

KELOMPOK 6
V. Theory of Gharar

69

Types of Games ................................................................................................... 69

Measure of Gharar ................................................................................................ 73
Characteristics ofZero-sum Games ....................................................................... 74

KELOMPOK 7
Expected vs. Actual Measures .............................................................................. 77
Risk and Zero-sum Structure ................................................................................. 79
Two Measures of Gharar....................................................................................... 82
Value ofRisk Management.................................................................................... 84

KELOMPOK 8
VI. Financial Engineering: An Islamic Perspective

87

Definition and Concept ......................................................................................... 87

Value of Innovation............................................................................................... 88
Sharcah and Creativity ......................................................................................... 89
Regulatory Arbitrage ............................................................................................ 90
State ofFinancial Innovation.................................................................................. 91
Principles ofIslamic Financial Engineering ............................................................. 92
Principle ofBalance .............................................................................................. 92
Interdependence .................................................................................................. 93
Principle of Acceptability ...................................................................................... 95

KELOMPOK 9
Roots of Prohibited Dealings ................................................................................ 96
Principle ofIntegration ........................................................................................... 98
Integration and Specialization ............................................................................... 99

Evaluation ofFinancial Products .......................................................................... 100

Principle of Consistency .................................................................................... 102
Strategies ofProduct Development...................................................................... 104
Imitation ............................................................................................................. 105
Mutation............................................................................................................. 107
Satisfaction ........................................................................................................ 108
Conclusion ......................................................................................................... 109

KELOMPOK 10
VII. Islamic Instruments for Hedging

111

Economic Hedging ............................................................................................. 112

Alignment ofAssets and Liabilities ....................................................................... 112
Natural Hedge.................................................................................................... 114
Dynamic Hedging............................................................................................... 115
Cooperative Hedging ......................................................................................... 116
Cooperative Hedgingfor Currency Risks ............................................................. 118
Bilateral Mutual Adjustment ................................................................................ 119
Contractual Hedging .......................................................................................... 120

KELOMPOK 11
Mu~d ara bah ................................................................................................... 121
Misreporting Risk ............................................................................................... 121
Credit-based Mudarabah .................................................................................... 122
Capital Risk ....................................................................................................... 123

Third Party Hedging ........................................................................................... 124

Deferred-price Sale ............................................................................................ 125
Liquidity Risk...................................................................................................... 126

Rate ofReturn Risk............................................................................................. 126

Diversified Deferred Price................................................................................... 127
Commodity-linked Bonds ................................................................................... 129
CurrencyRisk in Muraba~ha ............................................................................... 130

KELOMPOK 12
Value-based Salam ........................................................................................... 131
Discussion ......................................................................................................... 132
Liquidity ofSalam ............................................................................................... 135
Rate ofReturn Risk............................................................................................. 136
Other Applications of Value-based Salam ........................................................... 136
PayoffStructure of Contractual Hedging .............................................................. 137
Specialized Institutionsfor Risk Management ...................................................... 138
Summary........................................................................................................... 139
VIII. Conclusion

141