Question

A bank is concerned about excess volatility in its cash flows from some recent business loans it has made. Many of these loans have a fixed rate of interest and the bank's economics department has forecast a sharp increase in interest rates. The bank wants more stable cash flows. Which type of credit derivative contract would you most recommend for this situation?

A. Credit-linked note

B. Credit option

C. Credit risk option

D. Total-return swap

E. Credit swap

Answer

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