Title : Integration of Islamic Bank Specific Risks and their impact on the portfolios of Islamic banks
Authors:
- Syed Alamdar Ali Shah
- Raditya Sukmana
- Bayu Arie Fianto
Department : Islamic Economics
Journal Name : International Journal of Islamic and Middle Eastern Finance and Management
Kinds of Journal : Q2
Keywords : Islamic banks, risk management, Islamic banks' specific risk, integration of risk, diversification portfolio
Abstract:
Purpose This Study Aims to Propose a Risk Management Framework for Islamic Banks to Address Specific Risks that are unique to Islamic Bank Settings. Design/Methodology/Approach A Unique Methodology has been developed first by exploring the dynamics and behaviorals of Various Risks Unique to Islamic Banks. Second, it integrated them through a series of diagrams that show how they have, integrate and impact risk, returns and portfolios. Findings this study proposes a Unique Risk-Return Relationship Framework Encompassing Specific Risks faced by Islamic banks under the ambits of portfolio theory showing how Islamic banks establish a steeper risk-setting path under sharia compliance. By doing so, this study identification a unique "Islamic risk-return" nexus in Islamic settings as an explanation for the concerns of contemporary researchers that Islamic banks are more risky than conventional banks. Originity/Value the originality of this study is that extends the scope of risk management in Islamic banks from individual contracts-based to an integrated whole, identifying a unique transmission path of how risk affect diversification in Islamic banks.
For details : https://doi.org/10.1108/imefm-01-2020-0021
