HDalhaaawi

DEFINITION, TYPES AND HISTORY OF ISLAMIC BOND (SUKUK) Definition Sukuk is the Arabic name for financial certificates , but commonly refers to the Islamic equivalent of bonds . Since fixed income, interest bearing bonds are not permissible in Islam , Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets. History: In classical period Islam , Sakk (sukuk) – which is cognate with the European root " cheque " from Persian pronounced check' - meant any document representing a contract or conveyance of rights, obligations or monies done in conformity with the Shariah . Empirical evidence shows that sukuk were a product extensively used during medieval Islam for the transferring of financial obligations originating fr...

Risk entails both vulnerability of asset values and opportunities of income growth. Successful firms take advantage of these opportunities (Damodaran, 2005). An important element of management of risk is to understand the risk–return trade-o ff of di ff erent assets and investors. Investors can expect a higher rate of return only by increasing their exposure to risks. As the objective of financial institutions is to create value for the shareholders by acquiring assets in multiples of shareholder-owned funds, managing the resulting risks faced by the equity becomes an important function of these institutions . As Islamic banking is relatively new, the risks inherent in the instruments used are not well comprehended. Islamic banks can be expected to face two types of risks: risks that are similar to those faced by traditional financial intermediaries and risks that are unique owing to their compliance with the shari’a . Furthermore, Islamic banks are constrained in usin...