Convergence of Islamic and Conventional Interbank Rates

Ravindran Ramasamy; Mohammad Farhad Zangeneh

Convergence of Islamic and Conventional Interbank Rates

Ravindran Ramasamy * §

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Mohammad Farhad Zangeneh

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§ University Tun Abdul Razak

Convergence of Islamic and Conventional Interbank Rates

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Abstract

Financial Institutions’ (FI) and banks’ earnings on the trading portfolio are significantly influenced by the changing market conditions such as price of an asset, interest rates, market volatility, and market liquidity. Researchers to measure the risk related uncertainty of the FI’s earnings use few Market Risk Measurement Models (MRM). Historic Back Simulation Model is one of the approaches that consider the return on all assets, as non-normal, as against the RiskMetric Model that considers the returns on assets is symmetric. This paper investigates the risk and return associated with Islamic interbank offered rates (IIBOR) in Malaysia using Back Simulation model and the results are compared with the conventional interbank offered rates (CIBOR). On application of the Back Simulation approach over the two different data sets (Yield Rates of IIBOR and CIBOR), it was found that during the de-peg period, the value losses and gains for Islamic trading portfolios were found to be significantly higher at the tail end horizon depeg period. We also conducted independent sample “t” test to compare the mean losses and mean gains reported during these three time periods.

References

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Ravindran Ramasamy, Mohammad Farhad Zangeneh. 2013. "Convergence of Islamic and Conventional Interbank Rates". Global Journal of Computer Science and Technology - G: Interdisciplinary, Global Journal of Management and Business Research - G: Interdisciplinary GJMBR-G Volume 13 (GJMBR Volume 13 Issue G3).

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GJMBR Volume 13 Issue G3

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Journal Specifications

Crossref Journal DOI 10.17406/gjcst

Print ISSN 0975-4350

e-ISSN 0975-4172

Keywords

back simulation interbank offered rate islamic finance products value at risk volatility

Classification

GJMBR-G Classification JEL Code: G21

Submission ReceivedDecember 15, 2012
Peer Review Double Blind
Handling Editor
Accepted January 4, 2013
Published January 15, 2013

Version of record

v1.2

Issue date

April 9, 2013

Language

English

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Total Score: 142

Country: Unknown

Subject: Global Journal of Computer Science and Technology

Authors: Ravindran Ramasamy, Mohammad Farhad Zangeneh (PhD/Dr. count: 0)

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