---
title: "What is Islamic profit rate swap? | IslamicOpenFinance™"
description: "An alternative to an interest rate swap that exchanges fixed and floating profit flows through commodity murabaha trades."
url: https://islamicopenfinance.com/glossary/profit-rate-swap/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Treasury, liquidity and hedging](https://islamicopenfinance.com/glossary/#treasury)

Treasury, liquidity and hedging

# Islamic profit rate swap

An alternative to an interest rate swap that exchanges fixed and floating profit flows through commodity murabaha trades.

An Islamic profit rate swap lets two parties exchange a fixed profit flow for a floating one, or the reverse, without an interest rate swap. It is usually built from a series of commodity murabaha trades, some priced at a fixed rate and others at a floating rate reset each period. ISDA and IIFM publish standard documentation for it under the name mubadalatul arbaah, in single-sale and two-sale versions.

## Sources

- [IIFM, Published Standards: ISDA/IIFM Mubadalatul Arbaah (Profit Rate Swap)](https://www.iifm.net/standards/published-standards)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Tahawwut (hedging)** Hedging; in Islamic finance, risk management transactions built from permissible contracts rather than conventional derivatives.](https://islamicopenfinance.com/glossary/tahawwut/) [**Commodity murabaha** Interbank and treasury deals in which commodities are bought and sold on deferred payment to place or raise short-term funds.](https://islamicopenfinance.com/glossary/commodity-murabaha/) [**Rate of return risk** The risk that changes in market rates affect an Islamic bank's net income; the analogue of interest rate risk in the banking book.](https://islamicopenfinance.com/glossary/rate-of-return-risk/) [**Islamic cross-currency swap** An alternative to a cross-currency swap that exchanges profit and principal flows in two currencies through commodity trades.](https://islamicopenfinance.com/glossary/islamic-cross-currency-swap/)

**Treasury, liquidity and hedging**

1. [Commodity murabaha](https://islamicopenfinance.com/glossary/commodity-murabaha/)
2. [Wa'd (promise)](https://islamicopenfinance.com/glossary/wad/)
3. [Muwaadah (mutual promise)](https://islamicopenfinance.com/glossary/muwaadah/)
4. [Tahawwut (hedging)](https://islamicopenfinance.com/glossary/tahawwut/)
5. [Islamic FX forward](https://islamicopenfinance.com/glossary/islamic-fx-forward/)
6. [Islamic cross-currency swap](https://islamicopenfinance.com/glossary/islamic-cross-currency-swap/)
7. [Interbank investment wakalah](https://islamicopenfinance.com/glossary/interbank-investment-wakalah/)
8. [Collateralised murabahah](https://islamicopenfinance.com/glossary/collateralised-murabahah/)

[All 221 terms](https://islamicopenfinance.com/glossary/)