In perfect capital markets, the futures price of an asset should be an unbiased forecast of its realized spot price when the contract matures. In reality, futures prices are often higher for some assets and lower for others. However, there is no stability in the relationship between futures...

This paper investigates a special form of cooperative mortgage financing practiced in Oman. We integrate the literature of Mortgage Design with that of ROSCAs/ ASCRAs to illustrate that this mode of financing dissipates credit risk better than the formal mode of financing. It is also resilient...

This paper scrutinizes the ethicality of Islamic banks’ (IBs’) business model by employing the ‘objectives of Islamic law’ (Maqāsid al-Sharī’ah). This necessitates developing an ethical framework to construe two primary injunctions of Islamic finance, namely ribā and gharar. The...

This paper models Continuous Workout Mortgages (CWMs) in an economic environment with refinancings and prepayments by employing a market-observable variable such as the house price index of the pertaining locality. Our main results include: (a) explicit modelling of repayment and interest-only...

This article examines the organizational structure of Takaful ('Islamic' insurance) as it constitutes an interesting case study of a relatively inefficient system that has grown in popularity. This challenges the neoclassical economics view that the most efficient organizational form succeeds....

This study proposes a renewal of the contemporary Islamic banking Murabaha financing model as it aggravates financial fragility with waning economic efficiency. We adapt the working capital framework of successful US companies like Amazon and Walmart and model an innovative Murabaha facility as...

This paper offers a means to enhance the efficiency of the financial system in the form of Participating Mortgages (PMs) to make it more resilient and to mitigate systemic risk. We establish a basic setup to study the variants of PMs, distinguish them from convertible mortgages and derive...