Document Type : Science - Research (Islamic Financial Securities Pricing)

Authors

• Mohammad Javad Pakiniyat ¹
• Meysam Fadaei Vahed ²

¹ Researcher of the Center for Research, Development and Islamic Studies of the Securities and Exchange Organization

² Ph.D. Student of Financial Management, Allameh Tabataba'i University

Abstract

In recent years, Islamic finance instruments have remarkably developed in Iran’s capital market. One of the most common developed instruments in this area is salaf sukuk. This instrument has been issued by using different operational models and maturity and settlement of the price in maturity. One fundamental problem we face is the vast issuance and expansion of salaf sukuk market, observance of the market price and correct evaluation of that. This article has used binomial tree method logic as an accepted valuation method in conventional finance to evaluate and price salaf sukuk.
In this article, we introduce the general model of salaf sukuk with embedded call and put options and without embedded option. And then after the presentation of operational models of this sukuk, and using binomial tree valuation method, we design a pricing model for this sukuk with and without embedded call and put options. In this model, we price the sukuk by predicting the price of underlying asset in maturity and discount them. In the second model that contains embedded call and put option, we price the sukuk by predicting the price of underlying asset in maturity and evaluate the exercising or not exercising the options, predict the option value in maturity and then discount them.

Keywords

• Salaf Bonds
• Islamic Securities
• Sukuk
• Islamic Sukuk Bonds
• Pricing Model
• Pricing
• Binomial Tree Method. JEL Classification: G13

20.1001.1.22518290.1397.8.1.7.4