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Journal : Communications in Science and Technology

Analyzing the profit-loss sharing contracts with Markov model Wahyudi, Imam; Sakti, Ali
Communications in Science and Technology Vol 1 No 2 (2016)
Publisher : Komunitas Ilmuwan dan Profesional Muslim Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21924/cst.1.2.2016.17

Abstract

The purpose of this paper is to examine how to use first order Markov chain to build a reliable monitoring system for the profit-loss sharing based contracts (PLS) as the mode of financing contracts in Islamic bank with censored continuous-time observations. The paper adopts the longitudinal analysis with the first order Markov chain framework. Laplace transform was used with homogenous continuous time assumption, from discretized generator matrix, to generate the transition matrix. Various metrics, i.e.: eigenvalue and eigenvector were used to test the first order Markov chain assumption. Cox semi parametric model was used also to analyze the momentum and waiting time effect as non-Markov behavior. The result shows that first order Markov chain is powerful as a monitoring tool for Islamic banks. We find that waiting time negatively affected present rating downgrade (upgrade) significantly. Likewise, momentum covariate showed negative effect. Finally, the result confirms that different origin rating have different movement behavior. The paper explores the potential of Markov chain framework as a risk management tool for Islamic banks. It provides valuable insight and integrative model for banks to manage their borrower accounts. This model can be developed to be a powerful early warning system to identify which borrower needs to be monitored intensively. Ultimately, this model could potentially increase the efficiency, productivity and competitiveness of Islamic banks in Indonesia. The analysis used only rating data. Further study should be able to give additional information about the determinant factors of rating movement of the borrowers by incorporating various factors such as contract-related factors, bank-related factors, borrower-related factors and macroeconomic factors.
Co-Authors . Muhran . Nurhasanah Abdul Azis Abdillah Abdullah khanif Adi, Danang S Adian Husaini Adies Kadir Aditya Pangestu Halomoan Tampubolon agus irawan Ahmad Faizal Arifien Ahmad Ubaidillah ahmad yani Ahmad Zeintoro, Raka Akhmad Zaeni Al Haqi, M Nurul Hayyullah Al Mubarok, Ahmad Aly Syukron Aziz Ali Sakti, Ali Alief Ilhan Alrosyidi, Ach. Faruk Amara Yulia Amara Yulia F.P Aminullah Aminullah, Aminullah Aminuyati Ana Toni Roby Candra Yudha Analistiani, Analistiani Anam, Ruiziq Khoirul Andi D Yunianti Andianto Anggreni, Dwi Shinta Angraeni, Novita Anis Fauzi, Anis Apri H Iswanto Apri Heri Iswanto Aprilyana, Putri Ayunda Arida Susilowati Iswanto Arif R. Harijadi Arifin, Ghaniyah Geulis Arifin, Muhammad Alif Nur Ary Iswahyudi Asep Hendra Supriatna Asep Maulana, Asep Ashari, Beni Atmawi DARWIS Augustina, Sarah Aulia Rahman Aura Tesalonika Hendriardani Ayu Sayekti, Mahendi Pasca Aziza Aulia Azzahra Azwardi Azwardi Bahanawan, Adik Bahrul Rizal Bambang Suryadi, Bambang Basgoro, M.Ilham Bastian, Achmad Fandi Budi Aribowo Ceng Asmarahman Corryanti Corryanti Damayanti, Emilia Dede Rohadi Deded Sarip Nawawi Defriman Djafri Dendi, Muhammad Denny Hermawan Dewi Pusparini Dewi Puspita Sari Dewi, Ika Oktaviana Dhelittya Finaliyani Putri Dian Milvita Dicky Kristia Dinata Sinaga Dicky Triantoro Didin Hafidhuddin MS Donyuanalloh Azdy Dwi Astharini Efka Aris Rimbawanto Efrida Basri Efrida Basri Endhah Purwandari Erdy Santoso Erdy Santoso Erifmi Zahada Evi Yunita Fadiyanto, Sofyan Faiarudin Aulia Widadi Fariha, Tushliha Ayyuni Fauzan Addinul Jihad Fauzi Febrianto Fauzi Lubis, Muhammad Helmi Febri Billiandro Sartono Fengky Satria Yoresta Fitra Nugraha Fuad Zainuri Futoshi Ishiguri G Santosa Gandana, Danny M Garfansa, Marchel Putra GUNTUR WICAKSONO Gustan Pari Gustan Pari H P, Agustin Hadi Sumitro, Wiwid Haidir Juna Hakim, Sri Wahyuni Hamid, Sofian Hanafi Hanafi Hanafi Hari Prastyo, Hari hariyanto, Jimy Hasanah, Naili Uswatun HENDRA KURNIA PULUNGAN, HENDRA KURNIA Herianto Siahaan Humaidi, Wildan Husaimah, Melly Husin, Azrina I Wayan Darmawan Ieke Wulan Ayu Imam Bukhori Indah Tri Wahyuni Indiastary, Diyas Intan Ainur Rohmah Irkham Ulil Albab Irsan ALIPRAJA Iskandar Z Siregar ISKANDAR ZULKARNAEN SIREGAR Iswahyudi Iswahyudi Jajang Suryana Jamaludin Malik Jamaludin Malik Jamilatul Uyun Jun Tanabe Karliati, Tati Karlinasari, Rinda Kazuko Makino Kazuya Iizuka Kifti, Wan Mariatul Kusuma, EM. 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