Islamic Capital Markets : Products and Strategies

The standardization of Islamic financial products is currently evolving, both for Islamic derivatives & hedging methods and for Islamic bonds (Sukuk) and the process of standardization is expected to start soon also for other Islamic instruments. Islamic capital markets, and Islamic finance in general, is experiencing global rapid growth and is currently receiving more consideration also by non-Islamic investors.Islamic Finance is based on the prohibition of interest ("Riba"), excessive uncertaintly ("Gharar") and gambling ("Maysir" or "Qimar"). From these foundations, conventional financial products, such as interest-bearing instruments, options, forwards, futures, and insurances, as well as conventional practices like short-selling and leveraging, are not compliant with Islamic law ("Shariah"). Nevertheless, the Islamic finance industry has undertaken considerable efforts to create products and solutions of the same value, in many instances by replicating conventional structures in a Shariah-compliant manner. This has led to discussions between scholars and practitioners, as some scholars regard specific replication techniques merely as ploys and ruses. While no definite answer can be given yet concerning the question of Shariah-compliance for every single instrument, some trends are emerging in this dynamic market. Islamic derivative products are essential for asset management and risk management in any Islamic context, and provide answers to many of the investors' needs.This book covers all Islamic derivatives and structured products including state of the art Islamic short-selling methods used by hedge funds and gives a comprehensive overview of current Islamic capital markets. It takes a practical approach addressing practical issues in risk management and investing for both Islamic and non-Islamic readers..Contents A. Introduction B. Islamic capital market instruments 1. Hedging and Islamic derivatives (explaining many de facto practices used by Islamic financial institutions, and potential future applications not yet broadly applied; standardization and financial engineering) 2. Sukuk (Islamic bonds, current trends and issues in the market, standardization etc.) 3. Islamic funds (incl. specific hedge-fund practices, Islamic REITs, Islamic Private Equity funds, brief overview on market indices) 4. Islamic structured products (all currently existing types of Shariah-compliant structuring principles, example products, etc.) C. Islamic risk management 1. Risk management issues in Islamic contracts (overview, main types of risk, differences to risk management in conventional finance, etc.) 2. Basel II for Islamic financial instruments (brief overview on IFSB rules, etc.) 3. Risk management of basic financing modes (analysing all basic Islamic financing modes, e.g. Murabaha, PLS modes, with regards to their intrinsic risk and their management, as well as their Basel II risk weights etc.) 4. Risk management of Islamic funds (market risk, credit risk, ...) 5. Risk management of Sukuk (market risk, credit risk, operational risks, ...) 6. Risk management of Islamic structured products D. Outlook E. Annex 1. Bibliography 2. Index

DR M. KABIR HASSAN is a financial economist with consulting, research and teaching experience in development finance, money and capital markets, Islamic finance, corporate finance, investments, monetary economics, macroeconomics and international trade and finance. He has provided consulting services to the World Bank (WB), International Monetary Fund (IMF), Islamic Development Bank (IDB), African Development Bank (AfDB), USAID, Government of Bangladesh, Organization of Islamic Conferences (OIC), and many private organizations and universities around the world. Dr Hassan received his BA in Economics and Mathematics from Gustavus Adolphus College, Minnesota, USA, and MA in Economics and PhD in Finance from the University of Nebraska-Lincoln, USA respectively. He is now a Professor in the Department of Economics and Finance at the University of New Orleans, Louisiana, USA. He has more than 100 papers published in refereed academic journals to his credit. Dr Hassan supervised 27 doctoral theses, and many of his students are now well placed in the academia, government and private sectors. He is editor of The Global Journal of Finance and Economics and Journal of Islamic Economics, Banking and Finance, International Journal of Islamic and Middle Eastern Finance and Management, and co-editor of Journal of Economic Cooperation and Development. Dr Hassan has edited and published many books along with articles in refereed academic journals. Dr Hassan is co-editor (with M.K. Lewis) of Handbook of Islamic Banking and Islamic Finance and The International Library of Critical Writings in Economics (Edward Elgar, 2007). He is co-author Islamic Entrepreneurship (Routledge UK, 2010), and co-author (with Rasem N Kayed and Umar Oseni) of Islamic Finance (Pearson Publishing Company, 2012 forthcoming). A frequent traveller, Dr Hassan gives lectures and workshops in the US and abroad, and has presented over 100 research papers at professional conferences. His contact details are: mhassan@uno.edu; KabirHassan63@gmail.com; phone: 610-529-1247.

MICHAEL MAHLKNECHT is a consultant in the areas of risk management, capital markets and Islamic finance. He regularly holds presentations and gives university lectures on Islamic finance at the Ecole de Management Strasbourg, the Philipps-Universität of Marburg (Germany), the University of Rome Tor Vergata, and the Technical University of Munich. Michael has written several papers on Islamic banking, insurance and capital markets, as well as on issues as diverse as graphical analysis methods, financial hedging, structured products, and credit risk management, which were published in various national and international magazines, including the Capco Journal of Financial Transformation, Islamic Business & Finance, Banker Middle East, and Private Equity and Hedge Funds Middle East. Michael is the author of the introductory German handbook Islamic Finance: Einführung in Theorie und Praxis (Wiley, 2008) and of the Executive Report Islamic Capital Markets and Risk Management (Incisive Media/RISK Books, 2009). He currently lives in Hamburg, Germany and may be reached under his private e-mail address: hmmahlknecht@gmail.com