Sukuk in Islamic financial system: forecasting sukuk prices in Turkey with artificial neural network model

Islamic finance, which is based on trade, justice, and equity, has been developing rapidly all over the world in the last decade. Sukuk, which is considered the most common product of Islamic capital markets in the Islamic financial system, draws attention as the fastest-growing asset class. Sukuk, which achieved a rapid growth after the issues in 2001, was issued to Asian countries, especially Malaysia, in the first years, and started to spread all over the world in the 2010s. Turkey, in 2010, the first corporate sukuk issuance, in 2012, the first sovereign sukuk issuance; with the regulations it has made and the incentives it provides, has been a candidate to have a say in the global sukuk markets. The aim of this thesis, to contribute to the literature by examining all aspects of the sukuk issues, that could be considered relatively new to the world financial markets and Turkey, and to estimate sukuk prices in Turkey with an artificial neural network (ANN) model. For this purpose, firstly, examined the Islamic financial system and sukuk in a conceptual framework, described the sukuk issuance process, pricing mechanisms, and types; and demonstrated the status of the sukuk market in the world and Turkey. To forecast sukuk prices in Turkey, a multi feedback-layer ANN structure has been used and as a result, the closing prices of the sukuk were accurately estimated with a margin of error of 2,8 per thousand and %99,82 success rate. The forecastability of sukuk prices offers significant advantages, such as minimizing the risk and uncertainty of sukuk markets and maximizing profits or minimizing losses to investors. The result of the research is important in that it proves that the ANN model is an effective model for forecasting sukuk prices and that the dollar (DXY), volatility (VIX), geopolitical risk (GPR), S&P MENA sukuk indices and Eurobond bond prices are determinants in forecasting sukuk prices. It is envisaged to contribute to the literature in terms of being the first study in Turkey, that forecasted sukuk prices with the multi feedback-layer ANN model. Keywords: Islamic Finance, Sukuk, Sovereign Sukuk Price Forecasting, Artificial Neural Network Model.