 Why do sukuks (Islamic bonds) need a different pricing model?Md Hamid Uddin, Sarkar H. Kabir, M. Kabir Hassan, Mohammed S. Hossain and Jia Liu International Journal of Finance & Economics, 2022, vol. 27, issue 2, 2210-2234 Abstract: The global interest in sukuk, an Islamic alternative to bond financing, has grown rapidly, particularly after the 2008 global financial crisis, due to its distinctive features and investment quality. Sukuk were first launched in Malaysia and are presently available in 29 countries, including the United Kingdom, United States, Singapore, Hong Kong, and Luxembourg. Despite the global market prevalence of sukuk, asset pricing literature has not yet addressed the pricing mechanism of sukuk, which is inherently different from bonds and equity due to the contractual differences. However, analysts use LIBOR, or the Islamic interbank benchmark rate, as the ad‐hoc benchmark to evaluate sukuk performance. In this study, we develop a basic pricing model that captures the common risks in sukuk returns. We identify two risk factors for sukuk that require risk premiums: (a) sukuk market risk and (b) information asymmetry risk. Using these two common sukuk risks factors, investment analysts can estimate the fair value of sukuk more precisely than other ad hoc measures available. Date: 2022 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:27:y:2022:i:2:p:2210-2234 Ordering information: This journal article can be ordered from Access Statistics for this article International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd. |
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