Series 50: Issuer Risk Management

Issuer Risk Management

There is not a standardized set of guidelines for how municipalities should manage the risks associated with derivatives products. However, the Government Finance Officers Association (GFOA) has released suggested guidelines.

They recommend the issuer only proceed with a derivative if its representatives fully understand how the derivative works, the risks associated with it, and how to determine its fair market value. The derivatives should not be used for the purposes of speculation, but only to hedge against other possible risks the municipality might experience.

The issuer shou