---
title: "What is Tahawwut (hedging)? | IslamicOpenFinance™"
description: "Hedging; in Islamic finance, risk management transactions built from permissible contracts rather than conventional derivatives."
url: https://islamicopenfinance.com/glossary/tahawwut/
lang: en-GB
source: "IslamicOpenFinance"
---

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

Treasury, liquidity and hedging

# Tahawwut (hedging)

Hedging; in Islamic finance, risk management transactions built from permissible contracts rather than conventional derivatives.

Tahawwut means hedging: protecting against losses from movements in rates, currencies or prices. In Islamic finance, hedges are built from permissible contracts, such as wa'd, murabaha and spot exchange, rather than conventional swaps and options. ISDA and IIFM jointly publish the Tahawwut Master Agreement as the standard framework for these transactions, and AAOIFI has an accounting standard covering wa'd, khiyar and tahawwut.

## Sources

- [IIFM, Published Standards: ISDA/IIFM Tahawwut (Hedging) Master Agreement](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

[**Wa'd (promise)** A unilateral promise to do something in the future; it can be made binding and is used in hedging, sukuk and lease-to-own deals.](https://islamicopenfinance.com/glossary/wad/) [**Islamic profit rate swap** An alternative to an interest rate swap that exchanges fixed and floating profit flows through commodity murabaha trades.](https://islamicopenfinance.com/glossary/profit-rate-swap/) [**Islamic FX forward** A currency hedge built on a binding promise to exchange at an agreed rate on a future date, with the exchange itself done at spot.](https://islamicopenfinance.com/glossary/islamic-fx-forward/) [**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/) [**Maysir** Gambling or games of chance, where gain depends on luck rather than productive exchange; prohibited in Islamic finance.](https://islamicopenfinance.com/glossary/maysir/)

**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. [Islamic profit rate swap](https://islamicopenfinance.com/glossary/profit-rate-swap/)
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/)