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A firm has most of its liabilities in the form of floating-rate notes with a maturity of two years and a quarterly reset. The firm is not concerned with interest rate movements over the next four quarters but is concerned with potential movements after that. Which of the following strategies will allow the firm to hedge the expected change in interest rates? A. Enter into a 2-year, quarterly pay-fixed, receive-floating swap. B. Go long a payer’s swaption with a 1-year maturity. C. Go short a payer’s swaption with a 2-year maturity. |