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Working Paper 69 - Fostering the Use of Financial Risk Management Products in Developing Countries
Through the principle of asset and liability matching, the introduction of financial risk management products in developing countries, will permit the institutions of these countries to hedge their market risk with other counterparties in the market. The use of financial risk management products will also permit these countries and their institutions to match their borrowings terms to suit their debt service capacity, and their investment terms to match their cash inflow and outflow requirements, and to preserve their assets. However, in order to adequately benefit from the introduction of the financial risk management products and to protect institutions against risks involved in the use of these products, developing countries must establish related mitigation measures, including the introduction of necessary internal control mechanism, application of relevant accounting standards, and putting in place required legal documentation.