An Introduction to Islamic Finance: Theory and Practice

Financial Engineering 273 interest in the performance of the instrument, its inherent risk can grow as incen- tives to screen an ...

275 CHAPTER 13 Risk Management A s the banking business has changed signifi cantly in the last two decades, the nature of the ri ...

276 AN INTRODUCTION TO ISLAMIC FINANCE ■ (^) Regulatory environment: In the wake of a series of fi nancial crises, from the Thir ...

Risk Management 277 Banks are subjected to a wide array of risks in the course of their opera- tions, as illustrated by Table13. ...

278 AN INTRODUCTION TO ISLAMIC FINANCE An IFI is also subject to all of these risks to varying degrees. Its opera- tional, busin ...

Risk Management 279 document on risk management, identifying the different risks and listing 15 guiding principles of risk manag ...

Risk Profile of Islamic Financial Institution Financial Risk Credit Risk Rate-of- Return Risk Asset andLiability Management Risk ...

Risk Management 281 in addition to the typical principal/agent problems, the Islamic bank is exposed to an enhanced credit risk ...

282 AN INTRODUCTION TO ISLAMIC FINANCE Market Risk Market risk for a fi nancial institution arises in the form of unfavorable pr ...

Risk Management 283 similar to the market risk of a forward contract if it is not hedged properly. In order to hedge its positio ...

284 AN INTRODUCTION TO ISLAMIC FINANCE Some of the distinct features of equity investment risk are: ■ (^) The nature of equity i ...

Risk Management 285 overall infrastructure of the fi nancial sector. Business risk also includes the risk of becoming insolvent ...

286 AN INTRODUCTION TO ISLAMIC FINANCE profi ts to investment account holders while the shareholders received noth- ing from the ...

Risk Management 287 depositors. It has been suggested that making deductions from the profi ts belonging to investment account h ...

288 AN INTRODUCTION TO ISLAMIC FINANCE to liquidity risk if (i) it has not aligned its liabilities and assets on the same maturi ...

Risk Management 289 Malaysia has taken signifi cant steps to promote Islamic banks and to provide solutions to reduce liquidity ...

290 AN INTRODUCTION TO ISLAMIC FINANCE as agents for investors/depositors and pass all profi ts and losses through to them. In a ...

Risk Management 291 the IFI and the investors/depositors would be based on a risk - sharing and profi t/loss - sharing basis, th ...

292 AN INTRODUCTION TO ISLAMIC FINANCE ■ (^) The costs and risks in monitoring equity - type contracts and the associ- ated lega ...

Risk Management 293 Fiduciary risk can lead to dire consequences. First, it can damage a bank’s reputation and create panic amon ...