## Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?

_IMF Working Papers, October 1, 2007_

## Source details

**Canonical URL:** [Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?](https://www.imf.org/en/publications/wp/issues/2016/12/31/sukuk-vs-21382)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/sukuk-vs-21382/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/sukuk-vs-21382/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/sukuk-vs-21382/bundle-manifest.json)

## Bibliographic details
- Authors: Faezeh Raei, Selim Cakir
- Published: October 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868012.001

---

### Research question and context
- 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.

### Data and methods
- Comparative focus: Secondary market behavior of Eurobonds and Sukuk issued by the same issuer.
- VaR methodologies employed:
  - Delta-normal method.
  - Monte-Carlo simulation methods.

### Key findings
- Diversification gains:
  - The analysis implies gains from diversification when combining Sukuk and Eurobonds.
  - In certain cases, these gains are described as very significant.
- Risk and cost implications:
  - 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).

### Publication and metadata
- 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

### Practical implications for investors and policymakers
- Portfolio construction:
  - Consider including Sukuk alongside Eurobonds issued by the same sovereign or corporate issuer to capture potential VaR-reducing diversification benefits.
- Market access:
  - Issuers can broaden their investor base by tapping both the Islamic liquidity pool and conventional investors via Sukuk issuance.
- Risk management:
  - 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.

*Source: IMF Working Papers — "Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?" by Faezeh Raei and Selim Cakir, October 1, 2007.*

---

## Content in this bundle

- **_wp07237**
  - [_wp07237 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07237.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp07237 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07237.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/sukuk-vs-21382_