Tahawut

Ta'hawwut (or Tahawwut) is the Arabic word used to mean hedging.

Further it is the name of the master agreement being developed jointly by the International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association (ISDA) to provide a template for Islamic Derivatives transactions.

The template is based on the use of waad, murabaha and for the close out amount in case of early termination of outstanding obligations musawama.

References

• The Ta’Hawwut Master Agreement - Explanations by Norton Rose
• Sharia compliant hedging is finally, actually here from FT Alphaville
• Shari’ah-Compliant Master Agreement Introduced for Hedging Islamic Finance Transactions by K&L Gates
• Explanatory Memorandum from ISDA website