New Islamic Development Bank Institute (IsDBI) Book Details Practical Ways of Curtailing Risk in Islamic Finance

The Islamic Development Bank Institute (IsDBI) has released a new book detailing the application of ‘heavy tails’ distribution techniques to curtail risk in Islamic finance portfolios. The book, titled “Heavy Tails and Coherent Risk Measures in Islamic Finance”, was authored by Dr. Mahmoud Bekri, a Research Economist at IsDBI.

The book provides a hands-on introduction to the topic, covering the concepts behind “heavy tails” and coherent risk measures along with practical examples on how to apply the relevant techniques.

It consists of four main parts to provide the readers with a good foundation in the fundamental ideas and methods related to heavy tail distributions, as well as to familiarise them with advanced tools that use the heavy tail distributions.

The first part provides insights into Islamic finance, discussing its sources, main principles and guidelines, while the second part covers four main topics comprising of probability theory, time series modelling, heavy tail and stable distributions and the dependence structures.

The third part focuses on the implementation of the advanced methods in risk management, placing great emphasis on market risk. The final part covers portfolio selection and optimisation, and the portfolio performance measurement.

In his comments on the release of the new book, Dr. Sami Al-Suwailem, Acting Director General of IsDB Institute and IsDB Group Chief Economist, said, “Heavy-tails statistical distributions became of major importance since Nassim Taleb published his book: The Black Swan in 2007. Bringing these concepts to Islamic finance industry and capital markets would be of substantial value.”

The book is written in a simple and structured way and would be useful for academics, professionals, practitioners of Islamic finance, and students.

Author of the book, Dr. Mahmoud Bekri, said, “The significance of the book is that it does not only emphasize the importance of concepts like heavy tail and coherent risk measures and theoretically introduce them, but it also shows the practical side of using them by providing practical examples.”

The book can be purchased on IsDB Institute’s website (https://IsDBinstitute.org/) and read on IsDBI Reader App available in both Apple Store (https://apple.co/3L1zm5t) and Google Play Store (https://bit.ly/34okbCt).

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