25-21 Credit derivatives allow FIs to reduce credit risks without removing loan assets from their balance sheet.

Question

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Credit derivatives, such as credit default swaps or credit-linked notes, allow FIs to transfer or hedge credit risk without the need to sell or remove loan assets from their balance sheet. This can help FIs manage their risk exposure and maintain their loan portfolios without drastically altering their balance sheet.

25-21 Credit Derivatives Allow FIs to Reduce Credit Risks Without