INTERNATIONAL JOURNAL OF ISLAMIC AND MIDDLE EASTERN FINANCE AND MANAGEMENT, cilt.10, ss.290-311, 2017 (SSCI İndekslerine Giren Dergi)
Purpose - This paper aims to introduce a model-based stress-testing methodology for Islamic finance products. The importance of stress testing was indeed clearly underlined by the adverse developments in the global finance industry. One of the key takeaways was the need to strengthen the coverage of the capital framework. Cognisant of this fact, Basel III encapsulates provisions to enhance the financial sector's ability to withstand shocks arising from possible stress events, thereby reducing adverse spillovers into the real economy. Similarly, the Islamic Financial Services Board requires Islamic financial institutions to run stress tests as part of capital planning.