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A risk analyst at a financial institution is concerned about the bank’s loan exposure to a large industrial company, which is currently facing significant losses in its market share. The analyst is considering different credit risk mitigation strategies, including the use of credit default swaps (CDS). Which of the following statements correctly identifies a benefit of using CDS in this context?
A
CDS quantify the manufacturing company's default risk and allow the bank to monitor changes in this risk on a real-time basis.
B
CDS provide an agreement to periodically revalue the loan and transfer any net value change.
C
CDS require the manufacturing company to pay back the loan in full at an earlier point in time.
D
CDS allow the bank to offset its exposure to the company with loan exposures to other manufacturing companies.