A shar’iah-compliant equivalent to conventional call option. The call option gives the holder the right, without the obligation, to buy an underlying asset at a specified price (known as the strike price/ exercise price), over or by the end of a specific period of time (expiration date). Against this right, the holder pays a premium to the seller (writer) of the call.
The Islamic call is modeled on arboun/ urboun. By definition, arboun is an amount of money (down payment) paid by the buyer to the seller as part of the price so that if the buyer chooses to proceed with the contract, the outstanding amount shall be paid to the seller. Otherwise, the seller has the right to unilaterally forfeit the arboun. In this sense, arboun constitutes the price of the buyer’s right to exercise- i.e., the premium.
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