Risk is an inseparable part of the banking industry. Due to the specific nature of Islamic contracts, Islamic banking, in addition to the usual banking risks, also faces other risks peculiar to itself. Credit risk is among the most common risks in banking and various methods and instruments have been used to gauge and manage it.Credit default Swap (CDS) is one of the most important types of Credit derivatives which have been extensively used in conventional trade banking for the past decade, with the aim of managing the Credit risks. In this article the possibility of using this Credit derivative in Islamic banking has been studied with a jurisprudential approach, and it has been shown that benefitting ftom this Credit derivative in different ways can be validated.In this study the hypothesis of possibility of conforming the Credit default swap with the Guarantee [Dhaman] and Insurance [Bee may] contracts, has been studied, and in the end in accordance with the standards of Imamia jurisprudence, has been endorsed. Similarly supposing the Credit default swap as a 'newly-created contract' (because of possessing a new legal reality), has also been considered and it has been shown that on account of adhering to the general conditions of valid transactions, its validity as a newly-created contract is also possible.

Issuance of Islamic securities (sukuk) is one of the innovations of recent decades that open bright opportunities on the Islamic financial system. These bonds based on Islamic contracts are designed to substitute for securities, especially bonds are considered usury. The risks of this tool is the most important aspects that should be considered in the design of financial instruments. The first step in risk management, identification of risks and the next step is to reduce or eliminate it, thereby encouraging investors to buy these tools, resulting in a growth market to be provided. In this article dealt with the management of Credit risk and cover this risk. So far, the country's financial rules in Iran (rules of the Securities and Exchange Money and Credit Council and the Council) have been trying to pay guarantee obligations to cover Credit risk for investors. We believe that the guarantor for the bonds, despite the many advantages, but also disadvantages, which is better than other methods should be used to cover this risk. In this paper recommended Credit default swaps as a good way to cover sukuk Credit risk.

To solve challenges occurred in the existence of large sets of data, recent improvements of machine learning furnish promising results. Here to pro-pose a tool for predicting lesser liquid Credit default swap (CDS) rates in the presence of CDS spreads over a large period of time, we investigate different machine learning techniques and employ several measures such as the root mean square relative error to derive the best technique, which is useful for this type of prediction in finance. It is shown that the nearest neighbor is not only efficient in terms of accuracy but also desirable with respect to the elapsed time for running and deploying on unseen data.

The Credit derivative market has experienced a remarkable growth over the past decade. As such, there is a growing interest in tools for pricing of the most prominent Credit derivative, the Credit default swap (CDS). In this paper, we propose a heuristic algorithm for pricing of basket default swaps (BDS). For this purpose, genetic network programming (GNP), which is one of the most recent evolutionary methods with graph structure as a subgroup of machine learning methods, is applied to assess basket default swap spreads. Here GNP is an alternative way to model the default correlation structure among different reference entities in a basket default swap. In order to improve the efficiency of the proposed algorithm, GNP with the vigorous connection (GNP-VC) is developed and used for the first time in this paper. To implement our model, we consider a basket consisting of 25 entities of the CDX. NA.IG.5Y index. We compare the heuristic results with the Monte Carlo ones and discuss the efficiency of the proposed algorithm.The impact of vigorous connection on the performance of GNP is also reported.

In this paper,I present an approach for valuing Credit default swap (CDS),tranches of synthetic collateralized debt obligations and kth to default swaps.One-factor gaussian copula model is utilized to model default correlation for each pair of companies.In this research,I analyze the effect of different hazard rates and different default correlation between each pair of names on the spread to buy protection for multi-name Credit products.The findings in the valuation of a tranche of a CDO show that if the correlation is low,the junior equity tranche is very risky and the senior tranches are very safe.As the default correlation increases,the junior tranches become less risky and the senior tranches become more risky.The valuation of kth to default swaps also shows that as the hazard rate increases,the spread of all swaps increases.Also,increasing the correlations between all firms while holding the hazard rate constant lowers the cost of protection in kth to default CDS if k is small and increases it if k is large.

Credit risk as a possibility of a debtor’s default in its obligations has led Creditors to acquire some tools to cover it. Credit default swap as a derivative is one of the most effective risk management tools, because in addition to risk management, it provides an opportunity for the spread of secondary markets and the deepening of the capital market. Credit insurance is another type of Credit risk management tool that is often confused with default swaps. Finding some homologies between Credit insurance and Credit default swap geos back to our legal and jurisprudential system as well as the Western law. Due to the acceptance of insurance in Islamic jurisprudence, these similarities have been used to justify Credit default swap contract. In this research, an attempt has been made to draw a border between these two institutions. It should be noted that recognizing the nature of Credit default swaps will affect the assessment of the validity of such a contract from a jurisprudential point of view, and this discussion is crucial as it shows the possibility of accepting Credit default swaps in the Iranian capital market.

Credit risk as a possibility of a debtor’ s default in its obligations has led Creditors to acquire some tools to cover it. Credit default swap as a derivative is one of the most effective risk management tools, because in addition to risk management, it provides an opportunity for the spread of secondary markets and the deepening of the capital market. Credit insurance is another type of Credit risk management tool that is often confused with default swaps. Finding some homologies between Credit insurance and Credit default swap geos back to our legal and jurisprudential system as well as the Western law. Due to the acceptance of insurance in Islamic jurisprudence, these similarities have been used to justify Credit default swap contract. In this research, an attempt has been made to draw a border between these two institutions. It should be noted that recognizing the nature of Credit default swaps will affect the assessment of the validity of such a contract from a jurisprudential point of view, and this discussion is crucial as it shows the possibility of accepting Credit default swaps in the Iranian capital market.

Nowadays, Credit derivatives are known as ingenious financial devices to manage Credit risk. They are useful in controlling Credit risk of institutions and financial intermediaries' esp. Credit unions. Though, the motives for speculation and investment are also effective in increasing the exchange of such derivatives. Among them, Credit default swap are mostly exchanged derivatives those which take on an outstanding importance in managing Credit risk among Credit default swap banks. This research paper study the possibility of using Credit default swap to manage the Credit risk in Islamic banking, and profound Islamic jurisprudence based reasons to study the way this device agrees with Islamic principles of jurisprudence (Figh).

Given the importance of Credit risk in the banking system, banks have always paid special attention to Credit risk management and have used different tools to manage it. Using Credit derivatives, especially "Credit default swap" and "Credit- linked note", is one of the most common tools for this purpose. This paper investigates the possibility of applying these tools in the banking system of the Islamic Republic of Iran, and evaluates Credit derivatives based on general conditions of contracts from the viewpoint of the jurisprudence of Shi'a. As a result, we can say that CDS is compliant with shariah, but CLN is not due to its having some usury problem.