Taking a comparative approach to the subject, this text looks at the similarities and differences between Islamic capital markets and conventional capital markets. The book explains each particular topic from both the conventional and the Islamic perspective, offering a full understanding of Islamic capital markets, processes, and instruments. In addition to a full explanation of Islamic products, this approach also ensures a holistic understanding of the dual markets within which Islamic capital markets operate.

Ideal for both students and current practitioners, The New Islamic Capital Markets fills a large gap in the current literature on the subject. Whereas most books in this field cover the topic only superficially, this book offers the depth of coverage and academic rigor needed by professionals and serious students.

• Fills a gap in the current literature on the subject with comprehensive coverage and in-depth explanations
• Takes a comparative and holistic approach to the subject and features case studies from Malaysia, Indonesia, the Middle East, and Europe
• Written by a professor of finance at the International Centre for Education in Islamic Finance (INCEIF)

One of the few comprehensive, dedicated guides to the subject available, The New Islamic Capital Markets offers a full understanding of the subject for students and professionals alike.

Preface
Acknowledgments

Chapter 1
Founding Thoughts - Adam Smith, Capitalism and Islamic Finance
Introduction and Overview
Chapter Objective
Key Terms
1.1 The Roots: The Economy, Real and Financial Sectors, Risk and Islamic Finance
1.2 Uncertainty and Risk
1.3 Why are there Uncertainty and Risk?
1.4 Types of Risk
1.5 Risk in the real sector and in the financial sector
1.6 Financial system of capitalism: The foundations
1.7 Smith and Arrow
1.8 Smith and Ethical Rules
1.9 An Arrow – Debreu Economy
1.10 What happened to Smith-Arrow Risk Sharing Ideal?
1.11 Can economics explain a positive predetermined rate of interest?
1.12 Islamic Finance: The Foundations
1.13 Islamic Rules governing exchange
1.14 Islamic financial market and Instruments
1.15 Islamic Finance Industry at the Present
1.16 How does the “paper economy” look like today, some five years after the crisis?
Summary
Questions

Chapter 2
The Capital Markets
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
2.1 Introduction
2.2 Key Trends in Capital Market Development
2.3 Stock Exchanges of the Islamic World
2.4 The Debt Markets
2.5 The Money Markets
2.6 The Derivatives Market
2.7 Risks in Capital Markets
Summary
Questions and Problems
References
Websites

Chapter 3
Islamic Finance
Underlying Philosophy, Contracts, Instrument Design and Requisites
Topics in This Chapter
Chapter Objective
Key Terms
3.1 Introduction
3.2 Underlying Themes & Fundamentals of Fiqh Mu’amalah
3.3 Requirements for Islamic Capital Market Instruments/Transactions
3.4 Shariah Based Contracts for Financial Transactions
3.5 International Regulatory Institutions for Islamic Finance
Summary
Questions and Problems
References
Websites

Chapter 4
The Interbank Money Markets
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
4.1 Introduction
4.2 Money Market – Components
4.4 The Pricing of Money Market Instruments
4.5 Determining the Yield of a Money Market Instrument
4.6 Interest Rates, Yields and Price of Money Market Instruments
4.7 Malaysia Money Market – Trading Performance
4.8 The Central Bank, Money Market and Monetary Policy Operations
4.9 Commercial Banks and the Money Market
Summary
Questions and Problems
References
Websites

Chapter 5
The Islamic Interbank Money Market (IIMM)
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
5.1 Introduction
5.2 The Islamic Interbank Market
5.3 Pricing the Mudharabah Interbank Investment Funds
5.4 The Islamic Interbank Cheque Clearing System (IICCS)
5.5 Islamic Money Market Instruments
5.6 Key Islamic Money Market Instruments
5.9 Trading Performance on IIMM
5.10 The Kuala Lumpur Islamic Reference Rate (KLIRR)
5.11 The Bursa Suq Al Sila (BSAS)
5.12 The Commodity Murabahah
5.13 The Liquidity Management Centre (LMC)
Summary
Questions and Problems
References
Websites

Chapter 6
Bonds and Bond Markets
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
6.1 Introduction
6.2 Bank Borrowing Versus Bond Issuance
6.3 Debt Versus Equity and Bond Features
6.4 Face Value and Par Value
6.5 The Pricing of Bonds
6.6 Bond Yields and Yield Curves
6.7 Yield Curve and Credit Spreads
8.8 What Constitutes a Yield?
6.9 Interest Rate Change, Bond Yields and Duration
6.10 Risk Associated with Bonds
6.11 Types of Bonds
6.12 Bond Ratings
6.13 Ratings and Yield/Credit Spreads
Summary
Questions and Problems

Chapter 7
Sukuk and Sukuk Markets
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
7.1 WHAT ARE SUKUK?
7.2 SUKUK FUNDAMENTALS
7.2.1 Underlying Assets and Other Requirements for Sukuk
7.3 UNDERLYING ISLAMIC CONTRACTS FOR SUKUK
7.4 SUKUK STRUCTURES
7.5 SUKUK - PLAYERS
7.6 RISKS ASSOCIATED WITH INVESTING IN SUKUK
7.7 SUKUK IN MALAYSIA
7.8 SUKUK IN MALAYSIA: GROWTH AND EVOLUTION
7.9 UNDERLYING ASSET AND THE STRUCTURING OF SUKUK
7.10 THE PRICING OF SUKUK
SUMMARY
QUESTIONS AND PROBLEMS
Reference

Chapter 8
Common Stocks and Equity Markets
Introduction and Overview
Topics in This Unit
Chapter Objective
Key Terms
8.1 INTRODUCTION
8.2THE EVOLUTION OF STOCKS
8.3 WHY COMPANIES CHOOSE TO LIST
8.4 RIGHTS OF SHARE OWNERSHIP
8.5 EQUITY OWNERSHIP AND SHARIAH COMPLIANCE
8.6 THE VALUATION OF COMMON STOCKS
8.7 THE MARKET REQUIRED RATE OF RETURN
8.8 THE REQUIRED RETURN AND THE STOCK PRICE DYNAMICS
8.9 DIVIDEND GROWTH AND THE TRADE-OFF WITH CAPITAL GAINS
8.10 STOCK MARKET INDICES
8.11 SCHOOLS OF THOUGHT ON STOCK PRICE BEHAVIOR
SUMMARY
QUESTIONS AND PROBLEMS
References

Chapter 9
The Islamic Equities Market
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
9.1 INTRODUCTION
9.2 COMPONENTS OF AN ISLAMIC EQUITIES MARKET
9.3 THE SCREENING OF STOCKS FOR SHARIAH COMPLIANCE (missing)
9.4 COMPONENTS/PRODUCTS OF AN ISLAMIC EQUITIES MARKET
9.5 ISLAMIC EQUITY INDICES
9.6 THE STOCK EXCHANGES OF THE ISLAMIC WORLD
SUMMARY
QUESTIONS AND PROBLEMS
References
Websites

Chapter 10
Derivative Instruments: Products and Applications
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
10.1 INTRODUCTION
10.2 WHAT ARE DERIVATIVE INSTRUMENTS?
10.3 COMMON DERIVATIVE INSTRUMENTS
10.4 THE EVOLUTION OF DERIVATIVE INSTRUMENTS
10.5 FORWARD CONTRACTS
10.6 THE NEED FOR FUTURES CONTRACTS
10.7 THE NEED FOR OPTIONS
10.8 OPTIONS: KEY FEATURES AND TRADEOFFS
10.9 PAYOFF AND RISK PROFILE OF OPTION POSITIONS
10.10 INTEREST RATE SWAPS (IRS)
10.11 THE MAIN PLAYERS IN DERIVATIVE MARKETS
10.12 COMMODITY VERSUS FINANCIAL DERIVATIVES
10.13 DERIVATIVE MARKETS AND THE ROLE OF THE CLEARING HOUSE
10.14 APPLICATIONS: USING DERIVATIVES TO MANAGE RISK
10.15 WHAT DERIVATIVE TO USE?
10.16 OVERVIEW OF GLOBAL DERIVATIVES TRADING
SUMMARY
QUESTIONS AND PROBLEMS
References
Websites

Chapter 11
Shariah CompliantDerivative Instruments
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
11.1 INTRODUCTION
11.2 NECESSARY FEATURES FOR ISLAMIC FINANCIAL INSTRUMENTS
11.3 ISLAMIC FINANCE INSTRUMENTS WITH FEATURES OF DERIVATIVE INSTRUMENTS
11.4 THE ISLAMIC PROFIT RATE SWAP (IPRS)
11.5 HOW IS THE IFI HEDGED?
11.6 SUKUKS WITH EMBEDDED OPTIONS
11.7 Contemporary Derivative Instruments – How Sharia Compliant are they?
11.8 SHARIAH COMPLIANT INSTRUMENTS FOR MANAGING EXCHANGE RATE RISK
SUMMARY
QUESTIONS AND PROBLEMS
References
Website

Chapter 12
Exchange Rates and the Foreign Exchange Market
Introduction and Overview
Topics in This Chapter
Chapter Objective
Key Terms
12.1 Introduction
12.2 What Is an Exchange Rate?
12.3 Exchange Rate Risk
12.4 The Foreign Exchange Market
12.5 Foreign Exchange Market Players
12.6 Spot and Forward Markets
12.7 Bid-Ask Spreads
12.8 Cross Rates
12.9 The Forward Market for Exchange Rates
12.10 Forward Versus Spot Rates
12.11 Forward Market Players
12.12 Nominal Versus Real Exchange Rates
12.13 Shariah Compliant Techniques for Managing Currency Exposure
Summary
Questions and Problems
References
Websites

Chapter 13
Capital Markets and Government Policy
Introduction and Overview
Chapter Objective
Key Terms
13.1 Risk Sharing
13.2 Islamic Finance and Risk Sharing: Role of Public Policy
References
Index