Intro -- Islamic Capital Markets: Theory and Practice -- Copyright -- Contents -- Preface -- Why Islamic Finance? -- Why Money and Finance? -- Why Stress Capital Theory? -- Audience -- Overview of the Contents -- Acknowledgments -- Glossary of Arabic Terms -- Part One: Islamic Capital Markets: Tools of Securities Investment, Asset Pricing, Risk Management, and Portfolio Performance -- Chapter 1: Capital Theory and Islamic Capital Markets -- On the Nature of Capital -- On the Nature of Interest and Profit -- Capital Theory in Islamic Finance -- Time Preference and Capital Markets -- Standard Intertemporal Consumer Theory -- Equilibrium Market Rate -- Capital Productivity: The Intertemporal Production Opportunity Set -- General Equilibrium: Time Preference and Capital Productivity -- Intertemporal Exchange-Production Model -- Equilibrium Market Rate of Return -- Model of Capital as a Subsistence Fund -- Capital as an Engine of Growth -- The Capital Market and the Economy -- Definition of the Sectors -- National Income and Products Accounts -- Flow-of-Funds Accounts -- The Markets -- The Intermediation Role of the Capital Market -- Summary -- References -- Questions -- Chapter 2: Portfolio Theory and Risk-Return Tradeoff -- Market Uncertainty -- Graphical Description of Uncertainty: Highly Volatile Capital Markets -- Measuring Risk and Return -- Portfolio Diversification Theory -- Mean-Variance Efficiency Frontier -- Investor's Risk Preferences: Utility Function and Indifference Curves -- A Portfolio Diversification Model -- Portfolio Diversification in the Case of Two Risky Assets -- A Model of a Riskless Asset and a Risky Asset -- The Capital Market Line -- Tobin's Two-Fund Theorem -- Asset Pricing Based on Risk-Return Tradeoff -- Systematic and Unsystematic Risk -- The Capital Asset Pricing Model (CAPM) -- The Security Market Line.

Efficiency Frontier, Capital Market Line, Characteristic Line, and Security Market Line -- The Cost of Capital Based on the Capital Asset Pricing Model -- Summary -- References -- Questions -- Chapter 3: The Analytics of Sukuks -- Valuation of an Asset -- Present Value of a Cash Flow -- Simple Compounding and Continuous Compounding -- Valuation of Sukuks -- Yield to Maturity -- Reinvestment of Sukuk Coupons -- The Par Yield -- Zero-Coupon Sukuk -- Spot Rates and Forward Rates -- Spot Rates -- Forward Rates -- Arbitrage-Free Forward Rates -- Forward Rate Agreements -- Pricing Forward Rate Agreements -- The Term Structure of Rates of Return -- Types of Yield Curve -- Theories of Term Structure -- Unbiased Market Expectations (Pure Expectations) Theory -- Liquidity Premium Theory -- Market Segmentation Theory -- Preferred Habitat Theory -- Sukuk Duration -- Definition of Duration -- Properties of Duration -- Duration and Sukuk Price Volatility -- Sukuk Convexity -- Definition of Convexity -- Properties of Convexity -- Immunization of Sukuk Portfolio -- Cash-Flow Matching -- Duration Matching -- Application of Duration to Immunization -- Hedging with Futures Contracts -- Understand Risks in Sukuks -- Summary -- References -- Questions -- Chapter 4: Islamic Stocks -- Sharia Screening -- Islamic Indexes -- Speculation and Gambling -- Stock Yield -- Dividend Yield -- Earnings Per Share -- Price-to-Earnings (P/E) Ratio -- Common Stock Valuation -- Stock Price and Expected Rate of Return -- Equilibrium Rate of Return -- Changes in Equilibrium Stock Prices and Market Volatility -- Forecasting Stock Prices -- Importance of Forecasting and Types of Forecasting Models -- Auto-Regressive Forecast Models -- Conditional Forecast -- Growth Trend Forecasting -- Historical Price-to-Earnings (P/E) Ratio -- Historical Trend Line -- Fundamental and Technical Analysis.

Fundamental Analysis -- Technical Analysis -- The Efficiency Hypotheses of Stock Markets -- Evaluating Companies -- Mechanics of Trading -- What a Stock Market Does -- Reading Stock Quotes -- Placing a Stock Order -- Trade Execution -- Summary -- References -- Questions -- Chapter 5: The Cost of Capital -- Objective of the Firm: Market Value Maximization and the Cost of Capital -- Project Selection: The Hurdle Rate -- Defining Capital Cost: The Discount Rate -- The Net Cash Flow -- Net Cash Flow to Common Equity -- Net Cash Flow to Invested Capital -- The Present Value Formula -- Valuing a Preferred Stock -- Valuing a Common Stock -- Relationship between Risk and the Cost of Capital -- Defining Risk -- Types of Risk -- Estimating the Cost of Equity Capital and Overall Cost of Capital -- Capital Asset Pricing Model (CAPM) -- Risk-Adjusted versus Certainty-Equivalent Discount Rates -- Applying the CAPM to Calculate Certainty-Equivalent Cash Flow -- The Valuation of Securities, Leverage, and the Cost of Capital: The Modigliani and Miller Theory -- The Capitalization Rate for Uncertain Income Streams -- Debt Financing and Its Effects on Security Prices -- Weighted Average Cost of Capital -- Implications of the Capital Cost Analysis for the Theory of Investment: Capital Structure and Investment Policy -- The Agency Problem -- Summary -- References -- Questions -- Chapter 6: Asset Pricing under Uncertainty -- Modeling Risk and Return -- Financial Series Are Highly Volatile and Uncertain -- Discrete Time Uncertainty: Binomial Tree Approach to Uncertainty -- Uncertainty and Efficient Capital Markets: Random Walk and Martingale -- Market Efficiency and Arbitrage-Free Pricing -- Definition of Arbitrage -- Pricing of Assets by Arbitrage -- Basic Principles of Derivatives Pricing -- Types of Derivatives -- Derivatives Payoffs.

Principles of Derivatives Pricing Theory -- Summary -- References -- Questions -- Chapter 7: The Consumption-Based Pricing Model -- Intertemporal Optimization and Implication to Asset Pricing -- Asset-Specific Pricing and Correction for Risk -- Relationship between Expected Return and Beta -- The Mean Variance (mv) Frontier -- Risk-Neutral Pricing Implied by the General Pricing Formula pt … Et(mt+1Xt+1) -- Consumption-Based Contingent Discount Factors -- Equity Premium and Interest Rate Puzzles -- Summary -- References -- Questions -- Chapter 8: Futures Markets -- Institutional Aspects of Forward and Futures Contracts -- Definitions -- The Clearinghouse -- Margin Requirement for Futures Contracts -- Settlement of Futures Contracts -- Valuation of Forward and Futures Contracts -- Replication Portfolio of a Futures Contract: Underlying Asset and Cash -- Cash-and-Carry Arbitrage When Underlying Asset Pays Dividends -- Convenience Yield -- Pricing via Expectation and the Martingale Condition -- Foreign Currencies Futures and the Yield Rate Parity -- Hedging -- Purpose of Hedging -- Short Hedge -- Long Hedge -- Rolling the Hedge Forward -- The Hedge Ratio -- Cross Hedging -- Speculating in Futures Markets -- Summary -- References -- Questions -- Chapter 9: Stock Index Futures -- Specifications of the Stock Index Futures Contract -- The Pricing of a Stock Index Futures Contract -- Hedging with Stock Index Futures -- A Short Hedge to Protect Against a Bear Market -- A Long Hedge to Benefit from a Bull Market -- The Minimum Risk Hedge Ratio -- Cross Hedging -- Target Beta and Capture Alpha with Stock Index Futures -- Target Beta -- Alpha Capture -- Constructing an Indexed Portfolio -- Asset Allocation -- Creating a Synthetic T-bill -- Creating a Synthetic Equity Position -- Synthetic Asset Allocation Using Stock and Bond Futures -- Portfolio Insurance.

Index Arbitrage -- Program Trading -- Premium Buy and Sell Execution Levels -- Dynamic Hedging and Portfolio Insurance Strategy -- Summary -- References -- Questions -- Chapter 10: Interest-Rate Futures Markets and Applications to Sukuks -- Types of Interest-Rate Futures Contracts -- Short-Term Interest Rate Futures Contracts -- Longer Maturity Interest Rate Futures -- The Conversion Factor -- Cheapest to Deliver (CTD) Bond -- The Pricing of Sukuk Forward Contracts -- Hedging with Interest-Rate Futures -- Interest-Rate Futures in Sukuk Portfolio Management -- Controlling the Interest Rate Risk of a Sukuk Portfolio: Adjusting Duration -- Duration-Based Hedging Strategies -- Cross-Hedge Ratio, Hedged and CTD Instruments, and Target Volatility -- Immunization of Sukuk Portfolio with Interest-Rate Futures -- Portfolio Immunization over a Planning Horizon -- The Bank Immunization Case -- Summary -- References -- Questions -- Chapter 11: Basic Principles of Options -- Options: Basic Definitions -- Call Option Payoff -- Put Option Payoff -- Trading Strategies -- Covered Call -- Protective Put -- Long Straddle -- Short Straddle -- Spreads -- Butterfly Spread -- Option Pricing -- Illustrating the Notion of Replication and Hedging of Option Positions -- The Binomial Model of Option Pricing -- Replicating the Call in the Binomial Model -- Pricing the Put Option -- Call-Put Parity -- The Binomial Model: Extension to Two Periods -- The Option Delta -- Delta in Hedging Options -- Delta as a Sensitivity Measure -- Sign and Magnitude of Delta -- Variability of Delta -- Implications for Replication and Hedging -- Risk-Neutral Pricing -- Advantages of Risk-Neutral Pricing -- Steps in Risk-Neutral Pricing -- Why the Risk-Neutral Method Works -- The Black-Scholes (BS) Model -- Properties of the BS Model -- Call Prices in the BS Model -- Interpreting the BS Formula.

Call Prices and Risk-Neutral Pricing: Interpretation of N(d2).

A comprehensive look at the essentials of Islamic capital markets Bringing together theoretical and practical aspects of capital markets, Islamic Capital Markets offers readers a comprehensive insight into the institutions, instruments, and regulatory framework that comprise Islamic capital markets. Also exploring ideas about money, central banking, and economic growth theory and their role in Islamic capital markets, the book provides students and practitioners with essential information about the analytical tools of Islamic capital markets, serves as a guide to investing in Islamic assets, and examines risk management and the structure of Islamic financial products. Author and Islamic finance expert Noureddine Krichene examines the development of leading Islamic capital markets, including Malaysia, looking at sukuks and stocks in detail and emphasizing valuation, duration, convexity, immunization, yield curves, forward rates, swaps, and risks. Analyzing stock markets, stock valuation, price-earnings ratio, market efficiency hypothesis, and equity premiums, the book addresses uncertainty in capital markets, portfolio diversification theory, risk-return trade-off, pricing of assets, cost of capital, derivatives and their role in hedging and speculation, the principle of arbitrage and replication, Islamic structured products, the financing of large projects, and more. Emphasizes both theoretical and practical aspects of capital markets, covering analytical concepts such as the theory of arbitrage, pricing of assets, capital market pricing model, Arrow-Debreu state prices, risk-neutral pricing, derivatives markets, hedging and risk management, and structured products Provides students and practitioners of finance with must-have information about the analytical tools employed in Islamic capital markets Examines all the most recent developments in

major Islamic capital markets, including Malaysia Discussing the advantages of Islamic capital markets and the prospects for their development, Islamic Capital Markets gives readers a fundamental grounding in the subject, with an emphasis on financial theory and real world practice.

Description based on publisher supplied metadata and other sources.

Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.