ABSTRACT
This paper proposes a model for financing research and development activities with a focus on the pricing of sukuk as the source of financing. Pricing scenarios are conducted using the real options approach consisting of continuity, abandonment, and substitution scenarios. The results establish possible future values of products depending on the risk value obtained by converting the project’s technology readiness level as well as the scenario chosen. The results show consistency with the risk-return tradeoff, and the complete continuity scenario provides the closest results to the yields of existing project-based sukuk.
Notes
1. Special thanks to Madhu Kalimipalli of Wilfrid Laurier University, who made a comparison between sukuk and CLO at the Asian Finance Association International Conference, 24–26 June 2014 in Bali.