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The goal of this paper is to determine unique price factors of sukuk, Islamic instruments, which are similar to conventional bonds. To achieve the defined research goal, we have briefly investigated principles of sukuk and structures of funding process and reviewed contemporary research on pricing of Islamic bonds and possible factors of sukuk price. For the purpose of the study we conducted an econometric analysis on the time-series sample of three currently tradable sukuk issuances originated in Malaysia between 2014 and 2017. Regression model was built to determine relationship between prices of Islamic bonds and factors such as asset value, LIBOR and prices of conventional bonds. Our findings confirmed the positive relationship between the sukuk price and price for underlying asset. Moreover, we have determined the positive relationship between sukuk price and conventional bonds' price of the same issuer. LIBOR was found to be insignificant to the price of sukuk certificate. Results of this analysis confirm the linkage of sukuk to real economic activities, as the prices of bonds are correlated with underlying assets. Furthermore, findings showed that the independence of Islamic bonds from interest-based markets is proved, since sukuk prices are not linked to LIBOR, which underpins their non-debt nature. For this reason, we propose to consider sukuk as an alternative source of funding, which provides a new framework for global financial system, and possesses the high potential for diversification, securitization and developing of emerging markets.
bonds, sukuk, Islamic finance, pricing, risks, diversification
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