The Economics of Islamic Finance & Securitization – Andreas A. Jobst

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I. Introduction …………………………………………………………………………………………………………….3

II. Definition of Islamic finance…………………………………………………………………………………….4

A. The Main Types of Islamic Finance ……………………………………………………………….4

B. Islamic Finance and Put-Call Parity………………………………………………………………..8

C. Asset Pricing Islamic Finance ………………………………………………………………………12

III. Islamic Securitization……………………………………………………………………………………………14

A. Adapting the Principles of Islamic Finance to Securitization……………………………16

B. Islamic Investment Certificates (Sukuk)……………………………………………………….18

C. Current State of Islamic Securitization ………………………………………………………..21

IV. Challenges and Opportunities of Islamic Securitization ……………………………………………27

A. Legal Uncertainties …………………………………………………………………………………….27

B. Economic and Structural Impediments ………………………………………………………….30

C. Advantages of Islamic Securitization…………………………………………………………….31

V. Conclusion …………………………………………………………………………………………………………..31

References……………………………………………………………………………………………………………….33

Figures

1. The Pay-Off Profile under Put-Call Parity of the Three Basic Forms of Islamic Finance ..10

2. The Pay-Off Profile of Asset-Backed Securities under the Three Basic Forms of Islamic

Finance…………………………………………………………………………………………………………15

3 The Concept of an Ijarah Sukik Transaction ………………………………………………………………20

Text Boxes

1. Malaysia as Pacemaker of Islamic Securitization……………………………………………………….23

2. Two-Tier SPV Ijarah Securitization—CARAVAN I Limited………………………………………24

3. Securitization and Capital Market Development in Emerging Markets…………………………26