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Investors jump into $500m sharia sanctuary

Investors seeking less risk and more transparency this week paved the way for the launch of the largest flexible structured product in the Islamic market for $500m (€354m), in a bid to escape the sub-prime market fallout.

Deutsche Bank and the Dubai Islamic Bank issued the sharia compliant "collared profit rate swap". This trade is when an owner of a commodity leverages the price of their physical asset by widening the margin on its price, and enters a contract with a counterparty who agrees to buy the commodity at that leveraged price. The "collar" provides a minimum and maximum return for the investor.

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