Contingent Claim Approach for Pricing of Sovereign Sukuk for R&D Financing in Indonesia

Lindawati Wardani, Viverita Viverita, Zaäfri Ananto Husodo, Sinto Sunaryo

Research output: Contribution to journalArticlepeer-review

Abstract

This paper proposes a model for financing research and development activities with a focus on the pricing of sukuk as the source of financing. Pricing scenarios are conducted using the real options approach consisting of continuity, abandonment, and substitution scenarios. The results establish possible future values of products depending on the risk value obtained by converting the project’s technology readiness level as well as the scenario chosen. The results show consistency with the risk-return tradeoff, and the complete continuity scenario provides the closest results to the yields of existing project-based sukuk.

Original languageEnglish
JournalEmerging Markets Finance and Trade
DOIs
Publication statusAccepted/In press - 1 Jan 2019

Keywords

  • contingent claim
  • G12
  • G13
  • Islamic finance
  • pricing
  • R&D financing
  • sukuk

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