RELATIVE RISK OF ISLAMIC SUKUK OVER GOVERNMENT AND CONVENTIONAL BONDS

Dr. Ravindran Ramasamy; Shanmugam Munisamy; Mohd Hanif Mohd Helmi

RELATIVE RISK OF ISLAMIC SUKUK OVER GOVERNMENT AND CONVENTIONAL BONDS

Dr. Ravindran Ramasamy * §

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Shanmugam Munisamy

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Mohd Hanif Mohd Helmi

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§ Graduate School of Business University Tun Abdul Razak

RELATIVE RISK OF ISLAMIC SUKUK OVER GOVERNMENT AND CONVENTIONAL BONDS

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Abstract

Abstracts -Islamic bonds (sukuk) and conventional bond markets operate simultaneously in Malaysia complementing each other; the former operates on profit rates and the later on interest rates. In this paper we have analysed selected sukuks traded in Malaysia in terms of duration and convexity which are vital in deciding the market risk of fixed income bearing security. We compare these durations and convexities with that of government bonds and conventional bonds to assess the relative sensitivity of sukuk. Since the government bonds are highly liquid, without credit risk they stand better than sukuk. When compared with conventional bonds the sukuk stands better in these sensitivity measures. Interestingly the sukuk’s duration and convexities fall exactly in the middle between government and conventional bonds. The sukuk investor will get a better yield rate when compared to government bonds and lower rate when compared to conventional bonds. This information conveys that the Islamic sukuk is lesser risky than conventional bonds. Our findings are significant for the investors who are not investing in pure sukuk alone. The blend of government, Islamic and conventional bonds in a portfolio will bring down market risk and in addition will provide stable income above the government bonds.

References

11 Cites in Article

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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

Dr. Ramasamy, Shanmugam Munisamy, Mohd Helmi. 1970. "RELATIVE RISK OF ISLAMIC SUKUK OVER GOVERNMENT AND CONVENTIONAL BONDS". Global Journal of Management and Business Research, Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 11 (GJMBR Volume 11 Issue B6).

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GJMBR Volume 11 Issue B6

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

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Classification

GJMBR-B Classification JEL Code: G12

Submission ReceivedMarch 14, 2011
Peer Review Double Blind
Handling Editor
Accepted April 7, 2011
Published April 20, 2011

Version of record

v1.2

Language

English

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Total Score: 155

Country: Unknown

Subject: Global Journal of Management and Business Research

Authors: Dr. Ravindran Ramasamy , Shanmugam Munisamy , Mohd Hanif Mohd Helmi (PhD/Dr. count: 1)

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Publish Date: 2011 04, Wed

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Total Views: 5K

Total Downloads: 361

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