Book Description
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, priceearnings ratio, market efficiency hypothesis, and equity premiums, the book addresses uncertainty in capital markets, portfolio diversification theory, riskreturn tradeoff, 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, ArrowDebreu state prices, riskneutral pricing, derivatives markets, hedging and risk management, and structured products
Provides students and practitioners of finance with musthave 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.
Table of Contents
 Cover
 Contents
 Title
 Copyright
 Dedication
 Preface
 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
 Capital Productivity: The Intertemporal Production Opportunity Set
 General Equilibrium: Time Preference and Capital Productivity
 Model of Capital as a Subsistence Fund
 Capital as an Engine of Growth
 The Capital Market and the Economy
 The Intermediation Role of the Capital Market
 Summary
 References
 Questions

Chapter 2: Portfolio Theory and Risk–Return Tradeoff
 Market Uncertainty
 Portfolio Diversification Theory
 Portfolio Diversification in the Case of Two Risky Assets
 A Model of a Riskless Asset and a Risky Asset
 Asset Pricing Based on Risk–Return Tradeoff
 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
 Chapter 4: Islamic Stocks

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
 The Present Value Formula
 Relationship between Risk and the Cost of Capital
 Estimating the Cost of Equity Capital and Overall Cost of Capital
 Capital Asset Pricing Model (CAPM)
 RiskAdjusted versus CertaintyEquivalent Discount Rates
 Applying the CAPM to Calculate CertaintyEquivalent Cash Flow
 The Valuation of Securities, Leverage, and the Cost of Capital: The Modigliani and Miller Theory
 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

Chapter 7: The ConsumptionBased Pricing Model
 Intertemporal Optimization and Implication to Asset Pricing
 AssetSpecific Pricing and Correction for Risk
 Relationship between Expected Return and Beta
 The Mean Variance (mv) Frontier
 RiskNeutral Pricing Implied by the General Pricing Formula
 ConsumptionBased Contingent Discount Factors
 Equity Premium and Interest Rate Puzzles
 Summary
 References
 Questions
 Chapter 8: Futures Markets

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
 The Minimum Risk Hedge Ratio
 Cross Hedging
 Target Beta and Capture Alpha with Stock Index Futures
 Constructing an Indexed Portfolio
 Asset Allocation
 Portfolio Insurance
 Index Arbitrage
 Program Trading
 Summary
 References
 Questions
 Chapter 10: InterestRate Futures Markets and Applications to Sukuks
 Chapter 11: Basic Principles of Options

Chapter 12: Swaps
 Structure and Payoff of a Swap
 Motivations for the Swap
 The Valuation of PlainVanilla Swaps: The Swap Rate
 Currency Swaps
 Pricing a Currency Swap
 Equity Swap
 Credit Default Swap
 Total Return Swap
 Structured Notes: Inverse Floater and Bear Floater
 Options on Interest Rate Swaps: Swaptions
 InterestRate Swaps as Hedging Instruments
 Summary
 References
 Questions
 Chapter 13: Mutual Funds
 Chapter 14: Portfolio Performance and ValueatRisk

Chapter 1: Capital Theory and Islamic Capital Markets

Part Two: Money and Capital Markets

Chapter 15: The Banking System
 On the Nature of Central Banking
 On the Nature of Money
 Fractional Banking and the Money Multiplier
 The Central Bank
 The Reserves Market: Demand and Supply of Reserves
 The Regulatory and Supervisory Role of the Central Bank
 The Debate over the Role of the Central Bank
 The Theory of Two Interest Rates
 Central Banking and Financial Markets
 Central Bank in Islamic Finance
 Summary
 References
 Questions

Chapter 16: The Demand for Money
 Motives for Holding Money
 Demand for Money as Affected by the Rate of Interest
 The Baumol–Tobin Model of Money Demand
 Equilibrium in the Market for Money
 Demand for Money as Influenced by the Price Level
 Other Determinants of the Demand for Money
 Effects of Changes in the Money Market
 The Quantity Theory of Money and Money Demand
 The Cambridge Transaction Approach
 The Restatement of the Quantity Theory as a Demand for Money Function
 Summary
 References
 Questions

Chapter 17: Capital Markets and the Macroeconomy
 Financial Crises and Approaches for Recovery
 The IncomeExpenditure Sector
 The Monetary Sector
 Macroeconomic Equilibrium
 Macroeconomic Equilibrium under Keynesian Assumptions
 Classicists’ Approaches to Recovery from Depression
 Islamic Approaches to Recovery from Depression
 Stagflation and Post–2008 Crisis Unemployment
 Summary
 References
 Questions

Chapter 15: The Banking System

Part Three: Regulations and Institutions of Capital Markets and Islamic Structured Finance

Chapter 18: Institutions and Regulations of Capital Markets
 Regulatory Legislation
 The Securities and Exchange Commission
 The U.S. Commodity Futures Trading Commission
 The Stock Market
 Brokerage Firm
 Online Trading: A Form of Discount Brokerage
 Investment Advisers
 Clearinghouses
 Central Securities Depository
 Investment Banks
 Investment Companies
 Investment Funds
 Mutual Funds
 ExchangeTraded Funds
 Hedge Funds
 Money Market Funds
 Structured Investment Vehicles
 Summary
 References
 Questions
 Chapter 19: Institutions and Instruments of Islamic Capital Markets
 Chapter 20: Sukuks

Chapter 21: Islamic Structured Products
 Structured Finance
 Definition of Structured Products
 Features of Structured Products
 Risks and Benefits of Structured Products
 Types of Structured Products
 Financial Engineering of Structured Products
 Islamic Structured Products
 Challenges for Islamic Structurers
 Examples of Structured Products
 Summary
 References
 Questions

Chapter 18: Institutions and Regulations of Capital Markets
 About the Author
 Index
Product Information
 Title: Islamic Capital Markets: Theory and Practice
 Author(s):
 Release date: January 2013
 Publisher(s): Wiley
 ISBN: 9781118247167