A bank owns a fixed rate bond with a prsent value of $450 million and a duration of 8.71 years. Since it perceives increased interest rate risk in the near future ,
It would like to reduce the duration with 2 year swap to 7.81 to meet an overall risk objective.
What is the kind of swap it would be investing in ( i.e. pay-fixed or receive-fixed ) ?
What is the notional on the swap?