Islamic Capital Markets: A Comparative Approach -- Copyright -- Contents -- Preface -- Overview of Contents -- Additional Materials -- Acknowledgments -- Chapter 1: Founding Thoughts-Adam Smith, Capitalism, and Islamic Finance -- Introduction and Overview -- Chapter Topics -- 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 Is 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 the 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 -- 1.13.1: Property Rights -- 1.13.2: Contracts and Trust -- 1.13.3: Markets -- 1.13.4: Markets of the Prophet -- 1.14: Islamic Financial Markets and Instruments -- 1.15: Islamic Finance Industry at Present -- 1.16: What Does the "Paper Economy" Look Like Today, Some Five Years After the Crisis? -- Summary -- Questions and Problems -- References and Further Reading -- Chapter 2: The Capital Markets -- Introduction and Overview -- Chapter Topics -- Chapter Objective -- Key Terms -- 2.1: Introduction -- 2.2: Key Trends in Capital Market Development -- 2.2.1: Globalization -- 2.2.2: Liberalization -- 2.2.3: The Rise of Islamic Finance -- 2.3: Stock Exchanges of the Islamic World -- 2.3.1: Tadawul (Saudi Arabia) -- 2.3.2: Bursa Malaysia -- 2.3.3: The Istanbul Stock Exchange -- 2.3.4: The Indonesian Stock Exchange -- 2.3.5: The Qatar Exchange -- 2.3.6: Kuwait Stock Exchange -- 2.3.7: The Egyptian Stock Exchange -- 2.3.8: Tehran Stock Exchange (Iran).

2.3.9: Karachi Stock Exchange (Pakistan) -- 2.3.10: Muscat Stock Market (Oman) -- 2.3.11: Abu Dhabi Securities Exchange (ADX) -- 2.4: The Debt Markets -- 2.5: The Money Markets -- 2.6: The Derivatives Market -- 2.7: Risks in Capital Markets -- 2.7.1: Market/Price Risk -- 2.7.2: Interest Rate Risk -- 2.7.3: Default/Credit Risk -- 2.7.4: Liquidity Risk -- 2.7.5: Political Risk -- 2.7.6: Regulatory/Moral Hazard/Inflation Risks -- 2.7.7: Transparency and Misreporting Risks -- 2.7.8: Shariah Risk -- Summary -- Questions and Problems -- References and Further Reading -- Websites -- Chapter 3: Islamic Finance: Underlying Philosophy, Contracts, Instrument Design, and Requisites -- Introduction and Overview -- Chapter Topics -- Chapter Objective -- Key Terms -- 3.1: Introduction -- 3.2: Underlying Themes and Fundamentals of Fiqh Mu'amalah -- 3.3: Requirements for Islamic Capital Market Instruments/Transactions -- 3.3.1: Riba -- 3.3.2: Gharar -- 3.3.3: Maisyir -- 3.3.4: Jahl -- 3.4: Shariah-Based Contracts for Financial Transactions -- 3.4.1: Other Commonly Used Capital Market Contracts -- 3.5: International Regulatory Institutions for Islamic Finance -- 3.5.1: The International Islamic Fiqh Academy Jeddah (IIFA) -- 3.5.2: The Islamic Financial Services Board (IFSB) -- 3.5.3: Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) -- 3.5.4: The International Islamic Financial Market (IIFM) -- 3.5.5: The Islamic International Rating Agency (IIRA) -- 3.5.6: The Malaysia International Islamic Financial Centre (MIFC) -- 3.5.7: The International Shariah Research Academy for Islamic Finance (ISRA) -- Summary -- Questions and Problems -- References and Further Reading -- Websites -- Chapter 4: The Interbank Money Markets -- Introduction and Overview -- Chapter Topics -- Chapter Objective -- Key Terms -- 4.1: Introduction.

4.2: Money Market-Components -- 4.2.1: The Interbank Deposit System -- 4.3: Money Market Instruments -- 4.3.1: Malaysian Treasury Bills (MTBs) -- 4.3.2: Bank Negara Malaysia Bills (BNBs) -- 4.3.3: Malaysian Government Securities (MGSs) -- 4.3.4: Banker's Acceptances (BAs) -- 4.3.5: Commercial Papers (CPs) -- 4.3.6: Cagamas Notes -- 4.3.7: Cagamas Bonds -- 4.3.8: Khazanah Bonds -- 4.3.9: Negotiable Instrument of Deposits (NIDs) -- 4.3.10: Repurchase Agreements (REPOs) -- 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 -- 4.8.1: Ensuring the Smooth Functioning of the Banking System -- 4.8.2: Implementation of Monetary Policy -- 4.8.3: Offsetting Imbalances Resulting from the External Sector -- 4.8.4: Sterilization of Forex Market Operations -- 4.9: Commercial Banks and the Money Market -- 4.9.1: Managing Asset-Liability Mismatches -- Summary -- Questions and Problems -- References and Further Reading -- Websites -- Chapter 5: The Islamic Interbank Money Market (IIMM) -- Introduction and Overview -- Chapter Topics -- Chapter Objective -- Key Terms -- 5.1: Introduction -- 5.2: The Islamic Interbank Money Market -- 5.3: Pricing the Mudarabah 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 -- 5.6.1: Government Investment Issue (GII) -- 5.6.2: Bank Negara Negotiable Notes (BNNNs) -- 5.6.3: Cagamas Mudarabah Bonds (Sukuk Mudarabah Cagamas) -- 5.6.4: Islamic Accepted Bills (IABs) -- 5.6.5: Islamic Negotiable Instruments (INIs) -- 5.6.6: Islamic Private Debt Securities/Islamic Bonds.

5.6.7: Sell and Buy Back Agreement (SBBA) -- 5.7: Pricing of Islamic Money Market Instruments -- 5.8: The Islamic Interbank Money Market and Issues of Risk -- 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 and Further Reading -- Websites -- Chapter 6: Bonds and Bond Markets -- Introduction and Overview -- Chapter Topics -- 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 -- 6.4.1: Tenor -- 6.4.2: Coupon Rate -- 6.5: The Pricing of Bonds -- 6.6: Bond Yields and Yield Curves -- 6.7: Yield Curve and Credit Spreads -- 6.8: What Constitutes a Yield? -- 6.9: Interest Rate Change, Bond Yields, and Duration -- 6.9.1: Estimating Bond/Asset Value Change Using Duration Analysis -- 6.9.2: Immunizing a Portfolio of Bonds from Interest Rate Risk -- 6.9.3: Immunization: A Zero Coupon Bond through Maturity Matching -- 6.9.4: Immunizing a Coupon Bond with Maturity Matching -- 6.9.5: The Duration Matching Strategy -- 6.9.6: Duration of a Portfolio of Bond -- 6.10: Risks Associated with Bonds -- 6.11: Types of Bonds -- 6.11.1: Coupon Stripping and Zero Coupon Bonds -- 6.12: Bond Ratings -- 6.13: Ratings and Yield/Credit Spreads -- Summary -- Questions and Problems -- References and Further Reading -- Chapter 7: Sukuk and Sukuk Markets -- Introduction and Overview -- Chapter Topics -- 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.

7.4.1: A Generic Asset-Backed Sukuk Structure -- 7.4.2: A Sukuk Al Ijarah -- 7.4.3: A Bay Al Bithaman Ajil (BBA) Sukuk -- 7.4.4: Exotic Sukuk Structures -- 7.5: Sukuk Players -- 7.6: Risks Associated with Investing in Sukuk -- 7.6.1: Other Risks Affecting Sukuks -- 7.6.2: Managing Sukuk Risks -- 7.7: Sukuk in Malaysia -- 7.7.1: (1997) KFC Holdings -- 7.7.2: (2001) Gutherie Global Sukuk -- 7.7.3: (2001) Government of Malaysia Sukuk -- 7.7.4: (2006) The Khaznah Exchangeable Sukuk -- 7.8: Sukuk in Malaysia: Growth and Evolution -- 7.9: Underlying Asset and the Structuring of Sukuk -- 7.10: The Pricing of Sukuk -- 7.10.1: Valuing a Sukuk with Fixed Cash Flows -- 7.10.2: Valuing a Basic Sukuk Ijarah -- 7.10.3: Pricing of a Sukuk Ijarah with Warrants/Embedded Options -- Summary -- Questions and Problems -- References and Further Reading -- Chapter 8: Common Stocks and Equity Markets -- Introduction and Overview -- Chapter Topics -- Chapter Objective -- Key Terms -- 8.1: Introduction -- 8.2: The Evolution of Stocks -- 8.2.1: Stock Options and Employee Stock Option Schemes (ESOSs) -- 8.2.2: Rights Issue -- 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 -- 8.6.1: Common Stock Valuation-An Introduction -- 8.6.2: The Dividend Discount Model (DDM) -- 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 -- 8.9.1: Where Does the "G" Come From? -- 8.10: Stock Market Indices -- 8.10.1: Index Construction and Types of Indices -- 8.11: Schools of Thought on Stock Price Behavior -- 8.11.1: Fundamental Analysis (FA) -- 8.11.2: Technical Analysis (Chartism) -- 8.11.3: Efficient Market Hypothesis (EMH) -- 8.11.4: The Behavioral Finance School -- Summary.

Questions and Problems.