That is, for the 3-year swap there will be 12 quarterly floating-rate payments. So, while the first quarterly payment is known, the next 11 are not. However, there is a way to hedge the next 11 floating-rate payments by using a futures contract. Specifically, the futures contract used to hedge the future floating-rate payments in a swap whose reference rate is 3-month LIBOR is the Eurodollar CD futures contract.   Determining Future Floating-Rate Payments Now lets determine the future floating-rate payments. These payments can be locked in over the life of the swap using the Eurodollar CD futures contract. We will show how these floating-rate payments are computed using this contract. We will begin with the next quarterly payment-from April 1 of year 1 to June 30 of year 1. This quarter has 91 days. The floating-rate pay- ment will be determined by 3-month LIBOR on April 1 of year 1 and paid on June 30 of year 1. Where might the fixed-rate payer look to today (January 1 of year 1) to project what 3-month LIBOR will be on April 1 of year 1? One possibility is the Eurodollar CD futures market. There is a 3-month Eurodollar CD futures contract for settlement on June 30 of year 1. That futures contract will express the markets expectation of 3- month LIBOR on April 1 of year 1. For example, if the futures price for the 3-month Eurodollar CD futures contract that settles on June 30 of year 1 is 95.85, then as explained above, the 3-month Eurodollar futures rate is 4.15%. We will refer to that rate for 3-month LIBOR as the "for- ward rate." Therefore, if the fixed-rate payer bought 100 of these 3- month Eurodollar CD futures contracts on January 1 of year 1 (the incep- tion of the swap) that settle on June 30 of year 1, then the payment that will be locked in for the quarter (April 1 to June 30 of year 1) is   $100,000,000 ´ 0.0415 ´ 91 --------- 360 = $1,049,028       (Note that each futures contract is for $1 million and hence 100 con- tracts have a notional amount of $100 million.) Similarly, the Eurodollar CD futures contract can be used to lock in a floating-rate payment for each of the next 10 quarters.3Once again, it is important to emphasize that the reference rate at the beginning of period t determines the floating- rate that will be paid for the period. However, the floating-rate payment is