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Forecasting key financial variables in Shariah Based Financial instruments - Research Paper Example

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In order to study how volatile the Sukuk, an Islamic Financial instrument, was, this study considered Dow Jones Sukuk Grade Total Return Indices of 1-3, 3-5 and 7-10 year investment periods. Using MS Excel to compute monthly averages from daily returns and SPSS moving average…
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Forecasting key financial variables in Shariah Based Financial instruments
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Download file to see previous pages ique, yield to worst (YTW) to indicate the lowest expected yield, it was observed that a normalized value of 2.57% was at stake hence, investments were likely to yield 97.43% of the expected value at maturity. Based on 1-3 year investment and normal investments, balanced scorecard analysis Evaluateed that variable-income investment was much flexible but volatile to market shocks. On the other hand, it is observed that long-term fixed-income securities are much reliable but earn little income since they are not flexible.
In the United States, the population of Muslims has increased dramatically since the past twenty years. Further, there are strong indications that the wealth of the population has also grown more rapidly. In turn, the United States has developed a market for financial and banking alternatives that are compliant with the Shariah principles, as well as the religious and moral law of the Islam.
The concept of Shariah compliant or Islamic finance is typically based on the core tenets of the Islamic religion pertaining to property rights, economic and social justice, and distribution of wealth as well as its governance. Among the fundamental features of the Islamic finance system is the Prohibition of Gharar (ambiguous deals and contracts) and Riba that is interested (Kabir and Mahlkrecht 201, 74). According to proponents, Islamic finance significantly contributes to the global financial system stability.
Apparently, the performance as well as the relative stability of the Islamic banks and financial institutions frequently originate from the unique features of the financial instruments they provide. The Islamic finance system insists on asset backing as well as the principle of risk sharing. This helps in ensuring the direct connection between the activities of the real sector and financial transactions. In this case, this paper focuses on quantitative forecasting and analyzing volatility of Sukuk financial instrument by considering benchmarking and ...Download file to see next pagesRead More
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