Salam is a type of forward sale in the sense that the delivery of the sale’s underlying (subject-matter) is deferred to a prespecified future date. Being a debt finance tool, salam is by its unique nature associated with a bunch of risk factors, some of which the buyer is exposed to, others are the seller’s exposure.
| Risks on the buyer | Risks on the seller |
| Prices: prices of commodities may decrease during the period between the contract date and the delivery date. |
Costs: Costs of the object of salam may increase over the period between the contract date and the delivery date. |
| Non-delivery: Seller may refuse to deliver as agreed. | Non-delivery: Buyer may refuse to take delivery as agreed. |
| Marketing considerations: Tastes and demand may change over the salam’s tenor. | Assets/inventory: The seller may incur storage costs related to the object of salam. |
| Late delivery: the seller may delay delivery due to force majeure or unforeseen events. | Late delivery: the buyer might not be able to take delivery as scheduled due to unforeseen events. |
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