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Design and pricing of Islamic asset-based sukuk ̄ strips : an endeavour towards financial development
Joint Authors
Sajid, Ali
Haydar, Waqas Ali
Aqiq, Muhammad Arsalan
Abd al-Ghaffar
Source
Journal of Islamic Business and Management
Issue
Vol. 11, Issue 2 (31 Dec. 2021), pp.247-267, 21 p.
Publisher
Riphah International University Riphah Centre of Islamic Business
Publication Date
2021-12-31
Country of Publication
Pakistan
No. of Pages
21
Main Subjects
Engineering & Technology Sciences (Multidisciplinary)
Abstract EN
Purpose: The efficiency of the Islamic Financial Industry suffers from a lack of liquidity instruments and shallow secondary markets.
This paper reviews the financial intermediation theory and the complementary role of debt and money markets towards the broader goal of allocative efficiency, asset transformation, and diversification for the welfare of all economic agents.
Separately Tradable Registered Interest & Principle (STRIPs), created by disintegrating coupon and principal payment to be traded as discount bonds, have been effectively employed in the west for liquidity management.
This paper proposes a novel idea of ij ̄arah s.uk ̄uk STRIPS (ISS) that splits the payoffs of ij ̄arah s.uk ̄uk.
Method: The design and pricing of ISS are modeled employing lease valuation, certainty equivalent (C.E.), and bootstrapping.
Instead of the prevalent capital asset-pricing model, volatility of ij ̄arah s.uk ̄uk payoffs is modeled using certainty equivalents, which extend the analysis to micro-level investor utility function.
Also, the viability of ISS design is substantiated by numerical illustrations.
Findings: We found that the proposed ISS can serve as a short-term liquidity management instrument, facilitate price discovery and define the term structure in Islamic debt markets.
For sovereign issues, ISS can enable efficient monetary policy transmission, market completeness, and public finances for the underdeveloped Muslim world.
Significance: To the best of our knowledge, this is the first study propos- ing the ISS as a financial innovation.
The ISS proposed in this study will be a valuable addition to the arsenal of Islamic Financial offerings - augmenting the financial deepening and development of Islamic Financial Markets.
American Psychological Association (APA)
Haydar, Waqas Ali& Aqiq, Muhammad Arsalan& Abd al-Ghaffar& Sajid, Ali. 2021. Design and pricing of Islamic asset-based sukuk ̄ strips : an endeavour towards financial development. Journal of Islamic Business and Management،Vol. 11, no. 2, pp.247-267.
https://search.emarefa.net/detail/BIM-1429432
Modern Language Association (MLA)
Haydar, Waqas Ali…[et al.]. Design and pricing of Islamic asset-based sukuk ̄ strips : an endeavour towards financial development. Journal of Islamic Business and Management Vol. 11, no. 2 (2021), pp.247-267.
https://search.emarefa.net/detail/BIM-1429432
American Medical Association (AMA)
Haydar, Waqas Ali& Aqiq, Muhammad Arsalan& Abd al-Ghaffar& Sajid, Ali. Design and pricing of Islamic asset-based sukuk ̄ strips : an endeavour towards financial development. Journal of Islamic Business and Management. 2021. Vol. 11, no. 2, pp.247-267.
https://search.emarefa.net/detail/BIM-1429432
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 265-267
Record ID
BIM-1429432