a). The foundational principle of Islamic finance is the prohibition of interest (riba) and interest-based contracts. This prohibition has been stated in many verses in Quran and was explicated in many sayings of the Prophet PBUH.

In an Islamic finance system in which there are no risk-free assets, where all financial assets are contingent claims, and in which there are no interest rate-based debt contracts, it has been shown that the rate of return to financial assets was determined by the return to the real sector. Output is divided between labour and capital. Once labour is paid, the profit is then divided between entrepreneurs and equity owners. Since profits are ex post, returns on equities cannot be known ex ante. It is demonstrated that in such a system there is a one-to-one mapping between finance and real economy and that an equity-based finance is stable as assets and liabilities adjust to shocks, therefore the system is immune to banking crisis and disruption in the payments mechanism.

Risk Transfer simply involves transferring "only" risk to another person for a price. For example, the downside risk of stock can be transferred by purchasing a call option. In this way, the buyer of call option transfers its risk to the writer of the call option. Another example is insurance, wherein, the buyer of insurance transfers its risk to an insurance company.

Risk Sharing is an entirely different concept. It involves sharing (dividing) common risk among two or more persons. I think the "partnership" form of business organization is the most common (and oldest) practice of risk sharing. Banks also use this practice to lend a big amount to individual large size corporation, each bank supplying a portion of the loaned funds. In these cases "both" the profits, as well as potential losses, are shared between the parties.

b). Risk is a situation of exposing something into danger, loss, or harm. Ambiguity is a situation where you have more than one interpretation leading to confusion and vagueness. The difference between risk and uncertainty is that the outcomes of risks are known while ambiguity is unknown.If you are making a decision and you know the effect it will have at the end, then you will be more careful when making that decision.

Gharar is divided into two types: Gharar fahish (excess Gharar) and Gharar yasir (light Gharar). Examples of Gharar fahish in contracts are plenty as shown by the Al-Hadith and normally is associated with the reasons why Gharar sales are prohibited. On the other hand, Gharar yasir, which means small in amount or trivial is the uncertainty that is always present in all contracts and conducts, thus its existence is tolerated. All scholars agree that every transaction have some amount of Gharar in it but they start to differ when referring to the amount of Gharar contained in each.