A new generation of non-debt fixed-income finance
Purpose – The development of standardized fixed-income securities and organized secondary markets in which to price and trade the securities is a widely recognized factor in the emergence of modern developed economies. However, the ongoing global financial crisis has exposed the existence of a funda...
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Published in | International journal of Islamic and Middle Eastern finance and management Vol. 6; no. 4; pp. 267 - 277 |
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Main Author | |
Format | Journal Article |
Language | English |
Published |
Bingley
Emerald Group Publishing Limited
01.01.2013
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Subjects | |
Online Access | Get full text |
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Summary: | Purpose
– The development of standardized fixed-income securities and organized secondary markets in which to price and trade the securities is a widely recognized factor in the emergence of modern developed economies. However, the ongoing global financial crisis has exposed the existence of a fundamental and costly conflict between lender and borrower property rights when debt is securitized that has imperiled some fixed-income markets in their present form. This paper aims to suggest a new non-debt concept for fixed-income finance that avoids the conflict inherent in securitized debt.
Design/methodology/approach
– The paper considers how to build the foundation of non-debt fixed-income technology on property law instead of contract law.
Findings
– Fixed-income products based on the new technology expose investors to lower loss risk than investors incur with analogous debt-based products. Such products could lower the cost of fixed-income finance and contribute to the global restoration of fixed-income market liquidity.
Research limitations/implications
– Variations in property law across venues imply that the new financial technology is not implementable in all legal systems.
Originality/value
– The new financial technology could represent an opportunity for the Islamic financial industry to expand its fixed-income horizons in the global financial markets. The upside both within and beyond the Islamic community could be dramatic. |
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Bibliography: | ObjectType-Article-1 SourceType-Scholarly Journals-1 ObjectType-Feature-2 content type line 23 |
ISSN: | 1753-8394 1753-8408 |
DOI: | 10.1108/IMEFM-05-2013-0062 |