An Economic and Jurisprudential Investigation of Income Generation as a Result of Risk Tolerance; Case Study of Futures Contracts

Abstract

Deriving the basic infrastructures of financial and economic systems from the transaction-based propositions and laws that constitute the legal and religious superstructures of Islam in the field of economics is inevitable. This article, therefore, adopts both an analytical-descriptive and Shahid Sadr’s return methods to discover and extract infrastructures from superstructures to examine the illegitimacy of income due to risk tolerance as the subject of the contract. The results show that many of the reasons and rules mentioned above cannot be used independently in emerging issues such as contracts with the subject of risk transfer, but these rules are for contracts and transactions that have been independently ratified by the holy Shari'a. The terms can be explained only for such contracts, not issues that leave no independent reason to be accepted. In this paper, dynamic financial risk was specifically examined and the effects of the illegitimacy of income obtained from accepting the risk transferred to the other party as the subject of the contract (in the future contract as a case study) were also studied. It seems that the mere transfer of risk for the purpose of covering it is not jurisprudentially and legally independent and can be formulated in the form of cancellation of contracts from the perspective of the Holy Shari'a. For example, a futures contract, due to its zero-sum game, is placed under gambling contracts which are void and the income obtained through risk bearing is void and illegal.

Keywords

• risk tolerance
• gambling
• futures contract
• zero sum games