Impact of Pay-Fixed, Receive-Floating Swap Strategy

Jane is a portfolio manager at an investment firm that specializes in managing fixed-income assets. Due to recent interest rate movements, she is expecting a decline in rates over the next few years. To position her portfolio for this potential shift, she is considering various swap strategies. Specifically, she is contemplating whether to enter into a pay-fixed, receive-floating interest rate swap.

Jane believes this swap will benefit her portfolio by locking in higher fixed interest payments while taking advantage of potentially lower floating rates. She is also concerned about the credit risk associated with the counterparty in the swap agreement.

Which of the following best describes the implications of Jane entering into a pay-fixed, receive-floating interest rate swap?