{
  "title": "Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?",
  "publication": "IMF Working Papers, October 1, 2007",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/sukuk-vs-21382",
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  "summary": "This paper assesses the impact of bonds issued according to Islamic principles (Sukuk), on the cost and risk structure of investment portfolios by using the Value-at-Risk (VaR) framework. The market for Sukuk has grown tremendously in recent years at about 45 percent a year.",
  "sections": [
    {
      "heading": "Research question and context",
      "content": "- Objective: Assess the impact of bonds issued according to Islamic principles (Sukuk) on the cost and risk structure of investment portfolios using the Value-at-Risk (VaR) framework.\n- Market context: The market for Sukuk has grown tremendously in recent years at about 45 percent a year.\n- Institutional relevance: Sukuk provide sovereign governments and corporations with access to the huge and growing Islamic liquidity pool, in addition to the conventional investor base."
    },
    {
      "heading": "Data and methods",
      "content": "- Comparative focus: Secondary market behavior of Eurobonds and Sukuk issued by the same issuer.\n- VaR methodologies employed:\n  - Delta-normal method.\n  - Monte-Carlo simulation methods."
    },
    {
      "heading": "Key findings",
      "content": "- Diversification gains:\n  - The analysis implies gains from diversification when combining Sukuk and Eurobonds.\n  - In certain cases, these gains are described as very significant.\n- Risk and cost implications:\n  - Sukuk affect the cost and risk structure of investment portfolios as measured via VaR metrics (details of quantitative magnitudes and statistical tests are in the full working paper)."
    },
    {
      "heading": "Publication and metadata",
      "content": "- Authors: Faezeh Raei, Selim Cakir\n- Publication date: October 1, 2007\n- Series: IMF Working Papers, Working Paper No. 2007/237\n- Pages: 20\n- Volume: 2007\n- Issue: 237\n- DOI: https://doi.org/10.5089/9781451868012.001\n- ISBN: 9781451868012\n- ISSN: 1018-5941"
    },
    {
      "heading": "Practical implications for investors and policymakers",
      "content": "- Portfolio construction:\n  - Consider including Sukuk alongside Eurobonds issued by the same sovereign or corporate issuer to capture potential VaR-reducing diversification benefits.\n- Market access:\n  - Issuers can broaden their investor base by tapping both the Islamic liquidity pool and conventional investors via Sukuk issuance.\n- Risk management:\n  - VaR analysis using both delta-normal and Monte-Carlo approaches can reveal scenario-dependent diversification benefits; use both methods to inform risk limits and capital allocation.\n\nSource: IMF Working Papers — \"Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?\" by Faezeh Raei and Selim Cakir, October 1, 2007.\n\n---\n\n Content in this bundle\n\n- wp07237\n  - wp07237 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp07237 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/sukuk-vs-21382"
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    "Authors: Faezeh Raei, Selim Cakir",
    "Published: October 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451868012.001",
    "Objective: Assess the impact of bonds issued according to Islamic principles (Sukuk) on the cost and risk structure of investment portfolios using the Value-at-Risk (VaR) framework.",
    "Market context: The market for Sukuk has grown tremendously in recent years at about 45 percent a year.",
    "Institutional relevance: Sukuk provide sovereign governments and corporations with access to the huge and growing Islamic liquidity pool, in addition to the conventional investor base.",
    "Comparative focus: Secondary market behavior of Eurobonds and Sukuk issued by the same issuer.",
    "VaR methodologies employed:",
    "Diversification gains:",
    "Risk and cost implications:",
    "Authors: Faezeh Raei, Selim Cakir",
    "Publication date: October 1, 2007",
    "Series: IMF Working Papers, Working Paper No. 2007/237",
    "Pages: 20",
    "Volume: 2007",
    "Issue: 237",
    "DOI: https://doi.org/10.5089/9781451868012.001",
    "ISBN: 9781451868012",
    "ISSN: 1018-5941",
    "Portfolio construction:",
    "Market access:",
    "Risk management:",
    "**_wp07237**"
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