Accessibility navigation

Assessing Sukuk defaults using value-at-risk techniques

Alam, N., Bhatti, M. I. and Wong, J. T.F. (2018) Assessing Sukuk defaults using value-at-risk techniques. Managerial Finance, 44 (6). pp. 665-687. ISSN 0307-4358

Full text not archived in this repository.

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1108/MF-05-2018-0218


Purpose The purpose of this paper is to investigate the default characteristics of Sukuk issues by corporate firms in Malaysia using value-at-risk (VaR) techniques over a period of 16 years from 2000 to 2015 and across nine economic sectors. Design/methodology/approach The paper employs non-parametric and Monte Carlo simulations to estimate Sukuk defaults. Findings Authors analyses revealed that the VaR predictions were fairly consistent with the ratings provided by credit rating agencies, despite the limited tradability of Sukuk in the secondary market. The study was able to demonstrate that Sukuk is not riskier than conventional bonds in the Malaysian context. Research limitations/implications The research findings suggested that VaR values will depend on the fundamental value of a firm based on the considerations of market, credit and operational risk. It does not rely on the type of debt instrument, whether a Sukuk or conventional bonds. Practical implications The use of Sukuk along with conventional bonds as debt instruments creates opportunities for investors and bond issuers globally. Originality/value Although Sukuk has generated much interest among financial market players, studies are lacking on how to predict Sukuk defaults and whether Sukuk has the same risk profile compared to conventional bonds.

Item Type:Article
Divisions:University of Reading Malaysia
ID Code:81603
Publisher:Emerald Publishing

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation