Abstract:
Islamic financial instruments are sustainable because they are required until the contract is concluded, in contrast to conventional financial instruments which do not require the existence of the underlying asset. This paper aims to analyse Islamic derivatives such as bay al-salam, bay al-Istisna' and arbun as alternatives to conventional derivatives. The other focus of the paper is the examination of some conventional derivative contracts such as options for the futures as well the extent to which they are legally permitted in Islamic law. Furthermore, there is a discussion on the views of Muslim jurists on fictitious contracts, and the extent to which the expression and intention of contracting parties affect the contract. The study adopts a qualitative research methodology in which classical and modern jurists' views are analysed to discover Islamic and conventional derivatives contracts. This paper shows that conventional derivatives do not confirm with the principles of Islamic law. Therefore, Islamic derivatives can be an alternative to conventional forms for the sustainability of economic development.
