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Radical uncertainty, non-predictability, antifragility and risk-sharing Islamic finance

Author

Listed:
  • Umar Rafi

    (International Centre for Education in Islamic Finance (INCEIF), Kuala Lumpur)

  • Abbas Mirakhor

    (INCEIF)

  • Hossein Askari

    (The George Washington University, Washington (DC))

Abstract

Under conditions of radical uncertainty, risk sharing renders financial systems antifragile. The goal in this introductory paper is to show that risk-sharing Islamic finance shares the characteristics of an antifragile system by mapping some characteristics of antifragility onto those of risk-sharing Islamic finance. We compare the benefits of a risk-sharing financial system to those of the dominant risk-transfer/risk-shifting conventional system of finance, basing ourselves on the criteria of antifragility. We focus on the argument that the antifragility principle of “skin-in-the-game” is equivalent to risk-sharing Islamic finance requirement of “no gain without risk.”

Suggested Citation

  • Umar Rafi & Abbas Mirakhor & Hossein Askari, 2016. "Radical uncertainty, non-predictability, antifragility and risk-sharing Islamic finance," PSL Quarterly Review, Economia civile, vol. 69(279), pages 337-372.
    • Handle: RePEc:psl:pslqrr:2016:43
    DOI: http://dx.doi.org/10.13133/2037-3643_69.279_3
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    More about this item

    Keywords

    risk sharing; antifragility; skin-in-the-game; no gain without risk; Islamic finance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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