You are previewing Islamic Capital Markets: A Comparative Approach.
O'Reilly logo
Islamic Capital Markets: A Comparative Approach

Book Description

A comprehensive examination of Islamic capital markets

Taking a comparative approach to the subject, this text looks at the similarities and differences between Islamic capital markets and conventional capital markets. The book explains each particular topic from both the conventional and the Islamic perspective, offering a full understanding of Islamic capital markets, processes, and instruments. In addition to a full explanation of Islamic products, this approach also ensures a holistic understanding of the dual markets within which Islamic capital markets operate.

Ideal for both students and current practitioners, The New Islamic Capital Markets fills a large gap in the current literature on the subject. Whereas most books in this field cover the topic only superficially, this book offers the depth of coverage and academic rigor needed by professionals and serious students.

  • Fills a gap in the current literature on the subject with comprehensive coverage and in-depth explanations

  • Takes a comparative and holistic approach to the subject and features case studies from Malaysia, Indonesia, the Middle East, and Europe

  • Written by a professor of finance at the International Centre for Education in Islamic Finance (INCEIF)

One of the few comprehensive, dedicated guides to the subject available, The New Islamic Capital Markets offers a full understanding of the subject for students and professionals alike.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. PREFACE
    1. Overview of Contents
    2. Additional Materials
  7. Acknowledgments
  8. CHAPTER 1: Founding Thoughts—Adam Smith, Capitalism, and Islamic Finance
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 1.1 The Roots: The Economy, Real and Financial Sectors, Risk and Islamic Finance
    6. 1.2 Uncertainty and Risk
    7. 1.3 Why Is There Uncertainty and Risk?
    8. 1.4 Types of Risk
    9. 1.5 Risk in the Real Sector and in the Financial Sector
    10. 1.6 Financial System of Capitalism: The Foundations
    11. 1.7 Smith and Arrow
    12. 1.8 Smith and Ethical Rules
    13. 1.9 An Arrow-Debreu Economy
    14. 1.10 What Happened to the Smith-Arrow Risk-Sharing Ideal?
    15. 1.11 Can Economics Explain a Positive Predetermined Rate of Interest?
    16. 1.12 Islamic Finance: The Foundations
    17. 1.13 Islamic Rules Governing Exchange
    18. 1.14 Islamic Financial Markets and Instruments
    19. 1.15 Islamic Finance Industry at Present
    20. 1.16 What Does the “Paper Economy” Look Like Today, Some Five Years After the Crisis?
    21. Summary
    22. Questions and Problems
    23. References and Further Reading
  9. CHAPTER 2: The Capital Markets
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 2.1 Introduction
    6. 2.2 Key Trends in Capital Market Development
    7. 2.3 Stock Exchanges of the Islamic World
    8. 2.4 The Debt Markets
    9. 2.5 The Money Markets
    10. 2.6 The Derivatives Market
    11. 2.7 Risks in Capital Markets
    12. Summary
    13. Questions and Problems
    14. References and Further Reading
    15. Websites
  10. CHAPTER 3: Islamic Finance: Underlying Philosophy, Contracts, Instrument Design, and Requisites
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 3.1 Introduction
    6. 3.2 Underlying Themes and Fundamentals of Fiqh Mu'amalah
    7. 3.3 Requirements for Islamic Capital Market Instruments/Transactions
    8. 3.4 Shariah -Based Contracts for Financial Transactions
    9. 3.5 International Regulatory Institutions for Islamic Finance
    10. Summary
    11. Questions and Problems
    12. References and Further Reading
    13. Websites
  11. CHAPTER 4: The Interbank Money Markets
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 4.1 Introduction
    6. 4.2 Money Market — Components
    7. 4.3 Money Market Instruments
    8. 4.4 The Pricing of Money Market Instruments
    9. 4.5 Determining the Yield of a Money Market Instrument
    10. 4.6 Interest Rates, Yields, and Price of Money Market Instruments
    11. 4.7 Malaysia Money Market — Trading Performance
    12. 4.8 The Central Bank, Money Market, and Monetary Policy Operations
    13. 4.9 Commercial Banks and the Money Market
    14. Summary
    15. Questions and Problems
    16. References and Further Reading
    17. Websites
  12. CHAPTER 5: The Islamic Interbank Money Market (IIMM)
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 5.1 Introduction
    6. 5.2 The Islamic Interbank Money Market
    7. 5.3 Pricing the Mudarabah Interbank Investment Funds
    8. 5.4 The Islamic Interbank Cheque Clearing System (IICCS)
    9. 5.5 Islamic Money Market Instruments
    10. 5.6 Key Islamic Money Market Instruments
    11. 5.7 Pricing of Islamic Money Market Instruments
    12. 5.8 The Islamic Interbank Money Market and Issues of Risk
    13. 5.9 Trading Performance on IIMM
    14. 5.10 The Kuala Lumpur Islamic Reference Rate (KLIRR)
    15. 5.11 The Bursa Suq al Sila (BSaS)
    16. 5.12 The Commodity Murabahah
    17. 5.13 The Liquidity Management Centre (LMC)
    18. Summary
    19. Questions and Problems
    20. References and Further Reading
    21. Websites
  13. CHAPTER 6: Bonds and Bond Markets
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 6.1 Introduction
    6. 6.2 Bank Borrowing versus Bond Issuance
    7. 6.3 Debt versus Equity and Bond Features
    8. 6.4 Face Value and Par Value
    9. 6.5 The Pricing of Bonds
    10. 6.6 Bond Yields and Yield Curves
    11. 6.7 Yield Curve and Credit Spreads
    12. 6.8 What Constitutes a Yield?
    13. 6.9 Interest Rate Change, Bond Yields, and Duration
    14. 6.10 Risks Associated with Bonds
    15. 6.11 Types of Bonds
    16. 6.12 Bond Ratings
    17. 6.13 Ratings and Yield/Credit Spreads
    18. Summary
    19. Questions and Problems
    20. References and Further Reading
  14. CHAPTER 7: Sukuk and Sukuk Markets
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 7.1 What Are Sukuk ?
    6. 7.2 Sukuk Fundamentals
    7. 7.3 Underlying Islamic Contracts for Sukuk
    8. 7.4 Sukuk Structures
    9. 7.5 Sukuk Players
    10. 7.6 Risks Associated with Investing in Sukuk
    11. 7.7 Sukuk in Malaysia
    12. 7.8 Sukuk in Malaysia: Growth and Evolution
    13. 7.9 Underlying Asset and the Structuring of Sukuk
    14. 7.10 The Pricing of Sukuk
    15. Summary
    16. Questions and Problems
    17. References and Further Reading
  15. CHAPTER 8: Common Stocks and Equity Markets
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 8.1 Introduction
    6. 8.2 The Evolution of Stocks
    7. 8.3 Why Companies Choose to List
    8. 8.4 Rights of Share Ownership
    9. 8.5 Equity Ownership and Shariah Compliance
    10. 8.6 The Valuation of Common Stocks
    11. 8.7 The Market Required Rate of Return
    12. 8.8 The Required Return and the Stock Price Dynamics
    13. 8.9 Dividend Growth and the Trade-off with Capital Gains
    14. 8.10 Stock Market Indices
    15. 8.11 Schools of Thought on Stock Price Behavior
    16. Summary
    17. Questions and Problems
    18. References and Further Reading
  16. CHAPTER 9: The Islamic Equities Market
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 9.1 Introduction
    6. 9.2 Components of an Islamic Equities Market
    7. 9.3 The Screening of Stocks for Shariah Compliance
    8. 9.4 Components/Products of an Islamic Equities Market
    9. 9.5 Islamic Equity Indices
    10. 9.6 The Stock Exchanges of the Islamic World
    11. Summary
    12. Questions and Problems
    13. References and Further Reading
    14. Websites
  17. CHAPTER 10: Derivative Instruments: Products and Applications
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 10.1 Introduction
    6. 10.2 What Are Derivative Instruments?
    7. 10.3 Common Derivative Instruments
    8. 10.4 The Evolution of Derivative Instruments
    9. 10.5 Forward Contracts
    10. 10.6 The Need for Futures Contracts
    11. 10.7 The Need for Options
    12. 10.8 Options: Key Features and Trade-offs
    13. 10.9 Payoffs and Risk Profiles of Option Positions
    14. 10.10 Interest Rate Swaps (IRSs)
    15. 10.11 The Main Players in Derivative Markets
    16. 10.12 Commodities versus Financial Derivatives
    17. 10.13 Derivative Markets and the Role of the Clearinghouse
    18. 10.14 Applications: Using Derivatives to Manage Risk
    19. 10.15 What Derivative to Use?
    20. 10.16 Overview of Global Derivatives Trading
    21. Summary
    22. Questions and Problems
    23. References and Further Reading
    24. Websites
  18. CHAPTER 11: Shariah -Compliant Derivative Instruments
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 11.1 Introduction
    6. 11.2 Necessary Features for Islamic Financial Instruments
    7. 11.3 Islamic Finance Instruments with Features of Derivative Instruments
    8. 11.4 The Islamic Profit Rate Swap (IPRS)
    9. 11.5 How Is the IFI Hedged?
    10. 11.6 Sukuk with Embedded Options
    11. 11.7 Contemporary Derivative Instruments—How Shariah Compliant Are They?
    12. 11.8 Shariah -Compliant Instruments for Managing Exchange Rate Risk
    13. Summary
    14. Questions and Problems
    15. References and Further Reading
    16. Website
  19. CHAPTER 12: Exchange Rates and the Foreign Exchange Market
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 12.1 Introduction
    6. 12.2 What Is an Exchange Rate?
    7. 12.3 Exchange Rate Risk
    8. 12.4 The Foreign Exchange Market
    9. 2.5 Foreign Exchange Market Players
    10. 12.6 Spot and Forward Markets
    11. 12.7 Bid-Ask Spreads
    12. 12.8 Cross Rates
    13. 12.9 The Forward Market for Exchange Rates
    14. 12.10 Forward versus Spot Rates
    15. 12.11 Forward Market Players
    16. 12.12 Nominal versus Real Exchange Rates
    17. 12.13 Shariah-Compliant Techniques for Managing Currency Exposure
    18. Summary
    19. Questions and Problems
    20. References and Further Reading
    21. Websites
  20. CHAPTER 13: Capital Markets and Government Policy
    1. Introduction and Overview
    2. Chapter Topics
    3. Chapter Objective
    4. Key Terms
    5. 13.1 Risk Sharing
    6. 13.2 Islamic Finance and Risk Sharing: Role of Public Policy
    7. Questions and Problems
    8. References and Further Reading
  21. INDEX