Title: Shariah review of duration models: issues and future research directions

Authors: Syed Alamdar Ali Shah; Raditya Sukmana; Bayu Arie Fianto

Addresses: Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, 60286, Indonesia ' Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, 60286, Indonesia ' Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, 60286, Indonesia

Abstract: This research performs Shariah review of Macaulay's duration and all subsequently developed related models. It finds that there are twenty one models of duration that have been introduced so far but none of them is fully Shariah compliant for use in Islamic banks. The research identifies a variety of future research directions that include development of separate yield curves for assets and liabilities of Islamic banks; how book value based models are more compliant with Shariah; and need for incorporation of specific factors in an Islamic financial model to make them more Shariah effective in Islamic bank risk management.

Keywords: Islamic banks; duration models; Shariah review; interest rate risk; maturity gap risk management.

DOI: 10.1504/IJAAPE.2021.121510

International Journal of Accounting, Auditing and Performance Evaluation, 2021 Vol.17 No.3/4, pp.336 - 360

Received: 08 Jul 2020
Accepted: 25 Jun 2021
Published online: 16 Mar 2022 *

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