Albert Henri is the fixed-income manager of a large Canadian pension fund. The present value of the pension fund’s portfolio of assets is CAD 4 billion while the expected present value of the fund’s liabilities is CAD 5 billion. The respective modified durations are 8.254 and 6.825 years. The fund currently has an actuarial deficit (assets

The most liquid interest rate futures contract has a present value of CAD 68,336 and a duration of 2.1468 years. Analyzing both scenarios separately, what should Albert Henry do to avoid widening the pension fund gap? Choose the best option.

First Scenario Second Scenario

A. Do nothing. Buy 7,559 contracts.

B. Do nothing. Sell 7,559 contracts.

C. Buy 7,559 contracts. Do nothing.

D. Do nothing. Do nothing.