GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
An Analysis of Earnings at Risk (EaR) in Islamic Banks: A Case Study of GCC Countries
Paper Proposal Text :
The objective of this study is to examine the risk exposures of Islamic banks in GCC countries by utilising value at risk (VaR) framework . In analysing the modified value at risk, attributed as earnings at risk (EaR), this study will carefully analyse the behaviour of the data by taking into account their volatility, third and fourth moment.

Volatility of the data is analysed in two models, namely constant-variance model and exponential weighted moving average (EWMA) model. Testing normality vis a vis non-normality of the analysed variables will be conducted by simulating their respective probability density function and extracting their descriptive statistics.

In the event that the analysed variables exhibit non-normality, the EaR analysis would nullify VaR calculation proposed by JP Morgan Risk Metrics. As a result, this study will employ Cornish-Fisher expansion in its EaR quantification. Cornish-Fisher approximation is a method of calculating VaR upon which the confidence interval of analysed variables is an explicit function of the third, fourth, and the volatility.

The organisation of this study, hence, is as follows; first, an introduction; second, a revisit on the theoretical background of value at risk (VaR); third, an explanation on the methodology used in the study; fourth, discussions on the empirical findings; and fifth is conclusion.