I'd welcome advice and suggestions from the options gurus here who have hands-on experience with exotics (I'm assuming exotics but if a plain-vanilla strategy can do the job, great). I want to hedge a loan (c. US$3.5mn) taken out in Yen, repaying quarterly on a floating reset basis at a set margin over cost of funds. Client's income stream/asset base is in US$. Loan will likely run for more than 5 years term. The interest rate differential advantage is presently around 4.75%. We have the option of switching the loan (at bid/offer cost) into US$ several times a year, so gradual shifts in fundamentals and dynamics aren't a problem. It's those nasty short-term major yen up moves. Is it feasible to hedge this cost-effectively with a low-maintenance structure (and one that doesn't have an inherent secondary risk that needs to be addressed if an event triggers the hedge in some way)? Is it 'better' to have a longer term expiry and close out/reestablish, or opt for qt'ly in line with payment cycle?