Bank A makes a USD 10 million five-year loan and wants to offset the credit ex

Bank A makes a USD 10 million five-year loan and wants to offset the credit exposure to the obligor. A five-year credit default swap (CDS) with the loan as
the reference asset trades on the market at a swap premium of 50 basis points paid quarterly. In order to hedge its credit exposure bank A

A. Sells the five-year CDS and receives a quarterly payment of USD50000.

B. Buys the five-year CDS and makes a quarterly payment of USD12500.

C. Buys the five-year CDS and receives a quarterly payment of USD12500.

D. Sells the five-year CDS and makes a quarterly payment of USD50000.