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Managing Asset Price Risk in Sukuk

In this module, we will analyse how the market price of the asset at maturity of the Sukuk can pose a real risk to either the Investors and the SPV, or to the Obligor.

Managing Asset Price Risk in Sukuk

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Last Update 20 Dec 2021

In this module, we will analyse how the market price of the asset at maturity of the Sukuk can pose a real risk to either the Investors and the SPV, or to the Obligor.

Sukuk

Code: PG24772

SECTION 10

In this module, will introduce a working definition what a Sukuk actually is, look at some of the key aspects of this definition, we will summarise the stage we have reached so far in the structuring process, and outline the next steps we are going to take.

Basic Sukuk Structure 14m 43s

Introduction Recap Market Price of the Assets Example Asset Price Risk Example: Asset Price Risk Moving Forward Definition: Pro Rata Ownership Definition: Undivided Ownership Who Issues This Paper? Definition: SPV Transactions Starting Point

SECTION 18

Sukuk - Programme Wrap Up 00m 16s

Wrap Up

SECTION 17

In this module, we will complete the process to develop the final structure for a Sukuk al Ijara, and introduce the concept of a true sale.

Ijara Sukuk Structure 27m 06s

Introduction Preview Previous Modules Recap Initial Skeleton Structure Final Structure on How to Establish a Sukuk Ijara Contract The Role of Assets in a Sukuk Ijara Transaction The Nature of the Sale and Consequences of a True Sale East Cameron Gas Sukuk Issue Explained Sukuk Ijara in Reference to the Structuring Cycle Understanding the Absolutes of a Bond Summary

SECTION 16

In this module, we will look at how the cash flows from the profit generation are managed. We will understand how these cash flows generated will result in a potential mismatch when compared to the required profit payments to investors. We will investigate ways in which this mis-match can be managed, so that the investors receive the profit payments they expect, and at the time they expect to receive them.

Profit Reserve Account 22m 40s

Introduction Periodic Profit Payments Module Recap The Mechanism of Periodic Profit Payments How the Liquidity Mismatch Occurs in Practice in a Sukuk Ijara SPV: At the Center of the Transaction Method in Coordinating the Cash Flows Market Application Example of Profit Reserve Account: Ijara Sukuk Structure The Potential Outcomes of the Profit Reserve Account Market Application: Profit Reserve Account on an Annual Balance Market Application: Surplus at Maturity Market Appication: Handling Deficit at Maturity What if the Final Deficit in the Profit Reserve Account is at 6%? Possible Outcomes Summary Module Summary

SECTION 15

In this module, we will address the key issue of asset performance - What happens if the assets earn more than the investors are expecting? And also, what happens if the assets do not generate enough income to meet investors expectations?

Handling Profit Payment Risk 30m 05s

Introduction Recap of Previous Modules Key Issues to Solve Concept of Two Undertakings on Purchasing an Asset Excess Rental Income Overview What Happens to the Excess Amount? Is it Better to Pay Back the Obligor Immediately? How to Deliver the Cash Payment How to Overcome Income Deficit Third Party Repaid from Future Excess Rental Income What if there is No Excess Income? Module Recap

SECTION 14

In this module, we will continue to build out our structure. Having previously looked at asset price risk, we will now focus on asset performance risk.

Periodic Profit Payments 16m 41s

Introduction Previous Modules Recap Overview of Asset Performance Risk Market Application of Market Price Risk Why were Swaps Created in the First Place? How a Return Swap Works to an Interest Rate Markets Market Illustration in a Total Return Swap Transaction Module Summary

SECTION 13

In this module, we will analyse how the market price of the asset at maturity of the Sukuk can pose a real risk to either the Investors and the SPV, or to the Obligor.

Managing Asset Price Risk in Sukuk 25m 02s

Introduction Sukuk Al-Ijara - Recap How to Identify Key Areas of a Sukuk Structure How to Manage Market Price Risk between an Obligor and SPV on a Sukuk Transaction Determine the Risk by using the Sukuk Structuring Cycle How to Manage Asset Price Risk What is an Undertaking (also known as Wa'ad)? Risk that affects the Obligor and SPV in an Undertaking (Wa'ad) Transaction Solutions on How to Solve Risk in an Undertaking (Wa'ad) Transaction Market Scenario: Two Undertakings Summary

SECTION 12

In this module, we will recap the basic flows we have created for an Ijara Sukuk, discuss the possibility of using other structures for a Sukuk product, build out the skeleton structure we have, and look to identify some of the key areas we need to consider.

What is Missing So Far? 14m 24s

Introduction Preview Sukuk Al-Ijara Skeleton Structure Recap Generic Sukuk Structure Other Sukuk Structures Other Sample Structures The Structuring Cycle Investor Point-of-View Obligor Point-of-View Building Out Our Skeleton Structure Servicing the Assets Summary

SECTION 11

Sukuk - Part 2 Overview 00m 31s

Sukuk - Part 2 Overview Preview

SECTION 1

Programme Introduction 00m 57s

Programme Introduction Preview

SECTION 9

In this module, we will continue on our search for a better structure for our Sukuk. We have looked at using Murabaha and decided it is not the best structure for global Sukuks, due to the lack of liquidity and trading.

Improving on Murabaha 09m 27s