Islamic Treasury & Risk Management Products

Course Info

Date: July-04-2022

Length: 1 Week

City: Zurich

Fees: 4,600

Type: In Classroom

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Course Details

Course Outline

5 days course

The Nature of Money & Implication on Treasury


●     The rules of Sarf and contract
●     Riba Al-Nasiah
» Discussion: identifying assets that may be traded or
pledged from a Sharia’a perspective
●     Overview of traditional Money Market activities:
» Deposit & Interbank transactions
» Tradable Instruments
» Repo

 

Key Islamic Depository Tools
 


●     Summary rules for non-remunerative deposits:
» Qard/Wadiah deposits
●     Summary rules for remunerative deposits:
» Mudarabah deposits
» Wakalah deposits
» Murabaha deposits
●     Traditional Intrabank Relationship: Fund Transfer Pricing
(FTP), Inter branch Pricing (IBP) etc

Main Islamic Interbank Tool
 

●     Murabaha vs. Tawarruq vs. Reverse Murabaha - is there any difference?
●     Shari'a concerned about this tool
●     Brokers, OTC and live warrants
●     Breakage, Back value and compounding
●     Suq al Sila - Murabaha and Tawarruq in Malaysia
●     Standardized documents: IIFM, AIBIM
●     Leakage of Islamic funds - what is this? How do different markets deal with this?

 

Other Islamic Interbank Tool


●     Wakalah to do Murabaha vs. Investment Wakalah - what’s the difference?
●     Case study: Investment Dar vs. Blom Interbank Wakalah
●     Interbank Mudarabah
●     Wadiah for hibah & Wadiah for points

Tradable Instruments

●     A brief review of traditional tradable tools:
» Certificate of Deposits
» Government Securities (T-Bills etc)
» Banker’s Acceptance
» Commercial Papers
» Quotation basis: yield vs. discount
●     Does the Islamic market have alternatives for all the tools above?

 

Introduction to Sukuk - alternative Islamic tradable instruments


●     Short term, high grade issuance for Basel III:
» Central Bank of Bahrain Salam Sukuk
» Short term Sukuk Ijarah
» Are these instruments freely tradable in the secondary
market?
●     Longer-Term Sukuk
» Common structures: Ijarah, Istithmar
» Asset-based vs. Asset-backed Sukuk
» Tradability - Shari'a guideline
» Tenure: Malaysia vs. Global
» Pricing: Fixed-rate vs. Floating Rate Sukuk

 

Repo

 

●     Understanding a conventional repo
●     Why are Repos not widely used in the Islamic market?
●     How could an Islamic repo work?
●     The IIFM solution
●     Alternative solutions

 

 

Managing FX Risk 


● Shari'a compliant forward alternatives:
» Promise based solutions - unilateral promise, two
unilateral promises vs. bilateral promises
» Promise to deposit i.e. Cross Currency Deposit
» Are these solutions on the balance sheet or off-balance
sheet?
» Exiting these forward?
● How do Islamic banks hedge themselves?
» Long Murabaha
» Back to back promise
Group Exercise: Examine a traditional FX Swap & construct a
Sharia’a compliant FX Swap

 

Managing FX Risk II
 

● Sharia’a tools that provide options:
» Arbun
» Promises
» Juala
● How do we use the above to structure Shari'a compliant
currency options?
» Arbun - is the arbun for currency?
» Promises - how do we structure the option premium?
» Which solution is widely used?
● Calculating effective and break-even strike rate
● Are the options tradable?
Group Exercises:
1. How to use Tawarruq for Currency Option?
2. Are the following FX Risk Management Strategies
replicable in the Islamic market?
i. Put Option
ii. Put Spread

Managing Rate Risk 
 

● Shari'a analysis of the following traditional tools for interest
rate risk management
» Forward Rate Agreement (FRA)
» Interest Rate Futures
» Swaps - Interest Rate Swap (IRS) and Cross Currency
Swap (CCS)
» Interest Rate Options
Group Discussion: Are the following Interest Rate Option
Strategies replicable in the Islamic market?
i. Interest Rate Cap
ii. Interest Rate Floor
iii. Interest Rate Collar

Course Video