Friday, September 10, 2010

The 2010 Tahawwut Master Agreement: Paving the Way for Shari'Ah-Compliant Hedging

By Richard Fagerer, Michael E. Pikiel Jr., and Michael J.T. McMillen, Fulbright & Jaworski L.L.P.

Abstract: Modern Islamic finance remains in its infancy, having emerged only in the mid-1990s. Despite exceptional growth rates, Islamic finance is essentially devoid of derivatives products, in part due to doctrinal constraints and due in part to the infancy of the industry. In March of 2010, after years of effort, the International Swaps and Derivatives Association (ISDA) and International Islamic Financial Market (IIFM) released The 2010 Tahawwut Master Agreement for the standardized effectuation of certain swaps and derivative transactions that are compliant with the principles of Islamic Shari`ah. This paper analyzes certain provisions of The 2010 Tahawwut Master Agreement and compares those provisions with ISDA’s 2002 Master Agreement.

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