Description
Antifragility of Islamic Finance: The Risk-Sharing Alternative explains how risk-sharing, as defined under Islamic finance, makes financial systems antifragile. It highlights some great benefits of 100% equity-based finance over debt-based finance.
The contemporary financial crisis has given rise to discussions on a new approach to risk management referred to as antifragility. This concept specifies conditions under which systems turn out to be resilient to shocks caused by Black Swans―highly unpredictable outlier events that have a major negative (or positive) consequence when they occur, with their occurrence only explained retrospectively. Per this concept, the long-term survivability of any system centers exclusively on its antifragile nature, that may be, its ability to take in and even get pleasure from Black Swan–type shocks. This book aims to investigate risk-sharing Islamic finance as an antifragile system.
As a by-product of the Great Recession, the problems of debt-based financial systems are starting to be highlighted by industry and by academia. The antifragile solution for avoiding future financial crises is primarily centered on moving the existing financial system towards more equity and no more debt, thereby introducing skin-in-the-game into financial transactions. This book introduces a model of a 100% equity-based financial system, centered on risk sharing, as a imaginable alternative to the recent debt-based, conventional financial system, which is based on risk transfer and on risk shifting. In essence, this book attempts to provide a practical model for an antifragile financial system by evaluating the characteristics of Islamic finance under the criteria of antifragility.