An instrument that can be classified as a type of equity– i.e., it bears similarity to equity, though in essence it is not part of an entity’s equity (shareholders’ or owners’ equity). In Islamic banking and finance, equity-type instruments include mudaraba sukuk, and generally any instrument that is properly asset-backed with ring-fencing (of underlying assets).
Equity-type instruments entail fair valuation that directly depends on the underlying assets or economic resources.
Equity-type instruments, in this sense, differ from equity instruments, that have a direct connection with an entity’s shares of stock (common equity).
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