Search results

1 – 2 of 2
Per page
102050
Citations:
Loading...
Access Restricted. View access options
Article
Publication date: 31 July 2020

Atina Ahdika, Dedi Rosadi, Adhitya Ronnie Effendie and Gunardi

Farmer exchange rate (FER) is the ratio between a farmer's income and expenditure and is also an indicator of farmers’ welfare. There is little research regarding its use in risk…

344

Abstract

Purpose

Farmer exchange rate (FER) is the ratio between a farmer's income and expenditure and is also an indicator of farmers’ welfare. There is little research regarding its use in risk modeling in crop insurance. This study seeks to propose a design for a household margin insurance scheme of the agricultural sector based on FER.

Design/methodology/approach

This research employs various risk modeling concepts, i.e. value at risk, loss models and premium calculation, to construct the proposed model. The standard linear, static and time-varying copula models are used to identify the dependency between variables involved in calculating FER.

Findings

First, FER can be considered as the primary variable for risk modeling in agricultural household margin insurance because it demonstrates farmers’ financial ability. Second, temporal dependence estimated using the time-varying copula can minimize errors, reduce the premium rate and result in a tighter guarantee's level of security.

Originality/value

This research extends the previous similar studies related to the use of index ratio in margin insurance loss modeling. Its authenticity is in the use of FER, which represents the farmers' trading capability. FER determines farmers’ losses by considering two aspects: the farmers’ income rate and their ability to fulfill their life and farming needs. Also, originality exists in the use of the time-varying copulas in identifying the dependence of the indices involved in calculating FER.

Details

Agricultural Finance Review, vol. 81 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Access Restricted. View access options
Article
Publication date: 18 March 2022

Retno Subekti, Abdurakhman and Dedi Rosadi

This research aims to demonstrate portfolio modeling, which leads to Sharia compliance in encountering crises because of COVID-19. The authors proposed modifying the…

448

Abstract

Purpose

This research aims to demonstrate portfolio modeling, which leads to Sharia compliance in encountering crises because of COVID-19. The authors proposed modifying the Black–Litterman (BL) model adapted to the Sharia principle. The implementation of BL on Shariah-compliant stock data with capital asset pricing model (CAPM) requires adjustment because of the interest rate in the calculation. Thus, the objective of this study is to develop and evaluate the modified BL for Shariah-compliant stock portfolios in the financial crisis caused by the COVID-19 pandemic.

Design/methodology/approach

The Sharia-compliant asset pricing model (SCAPM) with the inflation rate was regarded as the new starting point in the BL model. This proposed model was implemented in Indonesia using monthly returns from the Jakarta Islamic Index (JII) list collected from February 2014 to June 2019. Furthermore, the portfolio performance of BL-SCAPM was compared with two reference portfolios, the mean-variance method and BL-CAPM.

Findings

The result presents that the portfolio performance of BL-SCAPM outperformed the MV and BL-CAPM. The impact of the Sharpe ratio of BL-SCAPM was more significant than the reference portfolio. The equal benefit was procured from both portfolios in July and August 2019. After the COVID-19 outbreak was officially declared in January 2020, the performance of BL-SCAPM was still above the BL. Despite a decline in portfolio value before and during the outbreak, the reference portfolio losses were higher than those of BL-SCAPM. Hence, this study manifested that BL-SCAPM outperformed the reference portfolio.

Practical implications

The results illustrate the empirical study which can be implemented for the Shariah-compliant stock market in Indonesia. By evaluating portfolio value on the COVID crisis for long investment, replacing CAPM with SCAPM in the BL model can transform the asset proportion. It decreased the portfolio loss during the crisis. Future research can be developed more from the open problems in this implementation to deliver the portfolio model into the Shariah framework with varied SCAPM in BL.

Originality/value

The attention to BL studies on portfolio building with Sharia-compliant stocks is rarely focused on the Islamic perspective. Hence, the novelty of this research is the idea of modifying the BL model with a Shariah starting point. More generally, this research enriches Shariah financial literacy regarding the stock market and, specifically, its implementation in the Indonesian stock market.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 15 no. 6
Type: Research Article
ISSN: 1753-8394

Keywords

1 – 2 of 2
Per page
102050