IIUM Repository

An application of GARCH modeling on the Malaysian sukuk spreads

Rahman, Maya Puspa and Omar, Mohd Azmi and Kassim, Salina (2013) An application of GARCH modeling on the Malaysian sukuk spreads. Journal of Islamic Finance, 2 (2). pp. 26-37. ISSN 2289-2109 E-ISSN 2289-2117

[img] PDF - Published Version
Restricted to Registered users only

Download (231kB) | Request a copy


This study explores the influencing factors of the Islamic bond (sukuk) spreads, by employing the generalised autoregressive conditional heteroscedasticity (GARCH) method. Apart from the general GARCH (1,1) model, a higher order of lags for both ARCH and GARCH terms are also considered which is applied onto both the investment and non-investment grade sukuk. This study is among the first few to document the empirical evidence on sukuk spreads and its volatility which is expected to further enrich the empirical literature of the financial markets especially in the Islamic finance. This is in line with the pressing demand for more in-depth information on various dimensions of the sukuk market given the importance of the sukuk in the global capital market. This study contributes significantly to the benefit of the investors, portfolio managers as well as regulators to better understand the underlying factors influencing the pricing and risk management of sukuk instruments. In addition, the assessment on the impact of the recent global financial crisis allows for a thorough understanding on the behavior of sukuk spreads so as to pre-empt the impact of future financial shocks to the sukuk market.

Item Type: Article (Journal)
Additional Information: 7137/56597
Uncontrolled Keywords: GARCH modelling, sukuk spreads, conditional variance, credit spreads, crisis.
Subjects: H Social Sciences > HA Statistics > HA154 Statistical data
H Social Sciences > HG Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Institute of Islamic Banking & Finance (IIiBF)
Depositing User: Dr Maya Puspa Rahman
Date Deposited: 02 May 2017 11:41
Last Modified: 02 May 2017 11:41
URI: http://irep.iium.edu.my/id/eprint/56597

Actions (login required)

View Item View Item


Downloads per month over past year