On the Design of Interest-Free Instruments
10 Pages Posted: 24 Nov 2017
Date Written: 1996
The main purpose of this paper is to present a theoretical model of an alternative fund-raising scheme for Muslim governments which are restricted by religious regulations against fixed-interest debt financing techniques. The proposed instrument is developed using the principles of a partial equilibrium theory for risk neutral as well as risk averse investors. The paper concludes with theoretical and empirical discussions on the efficiency of the financial instrument proposed.
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