The United Arab Emirates (UAE) has a multicultural society and a vast growing economy. The UAE is situated in the Middle East with the capital Abu Dhabi,an official language Arabic and covers over 83600 km carrying a population of over 8,200,000. Its Economy is reliant on oil, racking in 981 Billion Dirhams in respects to GDP ( Gross Domestic Product). it is a nation that is indeed blessed with riches that come in the form of oil and precious metals. the fact that it is a major hub that attracts people’s attention provides it with a huge pool of investors and one of the financial instruments investors engage in is derivatives (UAE government, 2009)..
‘A derivative is a financial instrument which is a contract between two parties that derives its price from an underlying asset’. Usually, the worth of the principal asset changes continuously as time goes by. These underlying assets could be bonds, stocks or even interest rates. Derivatives are used for hedging and mitigating risks that arise from foreign exchange and commodity dealings. They assure buyers of protection whether or not the type of derivative’s value increases or decreases during the time as specified in the contract (Dubai Islamic Bank, 2013) . All these benefits portray the purchase of a derivative as a good and before the establishment of derivatives, a substantial amount of people and organizations incurred financial losses due to the transaction of unsupervised assets such as money. UAE started introducing derivatives to the nation with gold and silver futures, then currency and after oil futures which are no longer traded in the financial markets. the current ones used in the UAE exist in the from of energy, metals, equities, future contracts and currency.
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...f banks, its own private bank, Dubai Islamic bank adheres to the shari’ah banking laws. These banking laws specify that derivatives must be matched up to the clients hedging objectives and no further. Thus, no profits are made through the use of derivatives but the clients’ interests are protected.
The UAE’s expansion of its derivative trading market shows that it is a huge part of its market and would lead to the further development and growth of the country. Although the nation is very much intertwined with the global market due to its tourist and trade reputation, it would lead to the further integration of the regional market with the international market which would open up more room for future advancement and unexploited benefits to the UAE. These derivates has boosted investments and developments throughout the UAE and will continue to do so in the future.
Derivatives as defined by Warren Buffet are time bombs, both for the companies that make use of them and the monetary framework. Fundamentally these instruments call for cash to change hands at a future date, with the add up to be dictated by one or more reference things, for example, premium rates, stock costs, or money values. Case in point, in the event that you are either long or short a S&P 500 prospects contract, you are a gathering to an extremely straightforward derivatives transaction, with your addition or misfortune determined from developments in the list. Derivatives contracts are of shifting length of time, running now and again to 20 or more years, and their quality is regularly attached to a few Variables.
reducing weights in options. This is because they can earn even more money that could have been
The data provided by the Near East Bank for the purposes of this study not only included 10 years of data (2004-2013) but also rendered all figures in 2013 USD. To facilitate calculation, these figures were then rendered into millions of USD. For reasons of privacy, the Near East Bank did not send identified data, as private banks in TRNC are not obligated to disclose their financial data to any party other than the Central Bank of TRNC itself.
The main and the most important problem of Saudi Arabia's economy is a strong dependence on the oil sector. The oil sector accounts for about 58% of GDP. In this regard, appears the question of economic diversification. The development of diversification plan began in 1996, according to the second five-year plan of economic development. However, the plan still has not brought significant results (you can see it from the statistics in the appendix). One of the key points of the economy's diversification is the development of the gas sector. Saudi Arabia is ranked sixth in the world reserves of this type of fuel (which is 3.9% of the world's reserves), but this sector remains undeveloped. The Government is making big bets on the development of gas, as they suppose it will help Saudi Arabia to become less dependent on oil. But the development of the gas industry will not help Saudi Arabia to diversify its economy, because this industry is related to the oil and will only aggravate the kingdom dependence on hydrocarbons .
investor makes a loss and the higher the S T, the lower is the profit.
After the crisis UAE’s economy suffered from 2008-2009 the economy has diversified itself and does not depend solely on oil anymore but also on other sectors such as tourism. The inflation rate of Dubai is 0.33% which is also significantly low (Dubai Statistics Centre,2016).The small medium enterprise does not want to take a risk where there are fluctuations in price level thereby effecting the buying power of people and also the demand and supply of the Al-Simpkin’s product. Furthermore,the government encourages foreign investment and besides the agent there are free zones such Jabel Ali which is the largest
The modern Islamic Finance industry is young, its timeline begin only a few decades ago. However, islamic finance is involving rapidly and continues to expend to serve a growing population of muslims as well as conventional.
Many factors have contributed to the impressive growth of Korean derivatives market. Some of the main contributing factors are:
The use of exchange traded derivatives can inflict substantial losses to investors. Trading of derivatives on exchanges can be faced with a number of risks. Borrowing and leverage are some of the major causes of the losses. The presence of relatively low cost alternatives to buying of stocks has eased the number of risks, although the major ones still ...
The priorities of Abu Dhabi Economic Vision 2030 is building a sustainable economy and ensuring the development of the country socially and regionally is balanced so that the benefit will affect the wellbeing of the population of the Emirates when the economy is at growth. The main obj...
Throughout financial markets worldwide the use of derivatives as a risk management methods have increased substantially over the last few decades. Derivatives are considered a financial instrument that derive their value from another financial asset or variable and as such they contrast from more commonly known financial instruments such as stocks and bonds. The main goal of derivatives is to protect investors against risk by allowing them to hedge their risk in the future value of an underlying asset (Derivative, 2016). This can be accomplished through different derivative forms, including swaps, options, forwards and futures. Forwards and futures are legally binding agreements used by investors
Regardless of the name Islamic, every products in Islamic capital market is provided for every single individual either Muslim or non-Muslim. The products is evolved and emerged from conventional capital market instruments to be aligned with Shariah. For example, equity is accepted as it is align with Shariah, while bond and securitized loans is emerging into Islamic capital market.
The UAE economic program is the second biggest in the GCC. Most oil depending GCC nation (91% of GDP in 1981) to the least (36% in 2005). Due to large number of retirees looking for tasks, The UAE government has designed particular tasks in different emirates to ease job discovering for everyone. These consist of power and petrochemical in Abu Dhabi, travel and leisure and solutions in Dubai, heavy industry in RAK.
In conclusion, hedging risk with financial derivatives can give firm range of benefits such as lower probability of having financial distress, lower value of debt ratio, and earn tax benefit. It can be concluded that firm should hedge risk using financial derivatives because lot evidence shows that firm using this strategy is more successful than those who are not. However, since different type of companies facing different risks, they should not necessarily use the same hedging strategy.
Derivatives were the first instruments developed to secure the supply of commodities and facilitate trade. Derivatives market can be traced back to the Middle Ages, they originally developed to meet the needs of farmers and to protect them from a decline in the price of their crops in case there was a crop failure.