An analyst considers the use of different credit risk transfer mechanisms, including CDS, to manage this exposure. Which of the following statements correctly describes an appropriate benefit of using CDS in this situation?

Exam-Like

CDS quantify the manufacturing company's default risk and allow the bank to monitor changes in this risk on a real-time basis.

CDS provide an agreement to periodically revalue the loan and transfer any net value change.

CDS require the manufacturing company to pay back the loan in full at an earlier point in time.

CDS allow the bank to offset its exposure to the company with loan exposures to other manufacturing companies.

Financial Risk Manager Part 1