A Jurisprudential Feasibility Study of Designing Interest Rate Swap in Proportion to the Iranian Capital Market

Abstract

Swap contracts, as kind of derivative instruments, are of high importance and usage in financial markets. One widely-used sort of them is interest rate swap contract. As the Iranian financial market is developing, it is needed that all new instruments be assessed by jurisprudential standards. In this article, besides examining interest rate swap contract with regard to its different definitions, sorts, features, models, applications, advantages, disadvantages, and the necessity of its being used in the Iranian financial market, we have assessed its jurisprudential and juridical aspects for the first time. By examining the jurisprudential aspect of interest rate swap contract using a descriptive-analytical and documentary approach, this article tries to prove the hypothesis that although such a contract in proportion to Iranian financial market is not amendable due to the presence of usury in the form of Bai and Muawadah, it may be designed through "Bai al khiar".

Keywords

• interest rate swap
• risk management
• bai
• muawadah
• profit rate swap
• interest rate volatility