Explanation

Let's analyze each position:

Payer Swaption: Gives the holder the right to pay fixed and receive floating

• Long payer swaption: Benefits when interest rates rise because the holder can exercise to pay a lower fixed rate than current market rates
• Short payer swaption: Loses when interest rates rise because they must receive the lower fixed rate

Receiver Swaption: Gives the holder the right to receive fixed and pay floating

• Long receiver swaption: Benefits when interest rates fall because the holder can exercise to receive a higher fixed rate than current market rates

When interest rates increase:

• Long payer swaption becomes more valuable (correct answer A)
• Short payer swaption loses value
• Long receiver swaption loses value

Therefore, an investor long a payer swaption benefits from rising interest rates.